CASA ratio
Also called: Current account savings account ratio · Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
The CASA ratio is the share of current account and savings account deposits in a bank's total deposits. These are cheap funds. Current accounts pay no interest, and savings accounts pay a low rate. A higher CASA ratio therefore means cheaper funding, which helps the bank's spread (the gap between what it earns on loans and what it pays on deposits).
CASA ratio = (current deposits + savings deposits) ÷ total deposits × 100
Example
A bank has total deposits of Rs 1,000 crore. Current deposits are Rs 150 crore and savings deposits are Rs 250 crore. Its CASA ratio is 400 ÷ 1,000 × 100 = 40%. The ratio comes under pressure when savers move money into mutual funds and higher-paying term deposits.
Don't confuse with
- Credit-deposit ratio: how much of total deposits has been lent out. CASA looks at the mix of deposits, not how they are used.
Related concepts
- Credit-deposit ratio
- Base rate
- Marginal Cost of Funds based Lending Rate
- External Benchmark Lending Rate
- Loan-to-value ratio
- Adverse selection
- Credit information company
- Letter of credit
- Factoring
- Trade Receivables Discounting System