Definition
CASA Ratio
The CASA ratio is the share of a bank's total deposits held in current and savings accounts, which pay little or no interest.
CASA stands for Current Account Savings Account. Because current accounts pay no interest and savings accounts pay low rates, a high CASA ratio lowers a bank's cost of funds and lifts its NIM. It is one of the most cited measures of a bank's deposit franchise quality.
Indian private banks with strong transaction-banking and salary-account relationships often report CASA ratios above 40%. When term-deposit rates rise sharply, customers shift money from savings to fixed deposits, pulling CASA ratios down and squeezing margins, a dynamic seen across recent RBI rate cycles.
Related terms
- Net Interest Margin (NIM)Net Interest Margin is the difference between the interest a bank earns on advances and investments and what it pays on deposits and borrowings, expressed as a percentage of average interest-earning assets.
- Cost of FundsCost of Funds is the weighted-average interest rate a bank or NBFC pays to raise the money it lends, covering deposits, borrowings and bonds.
- CASA (Current and Savings Account)CASA refers to the combined balances in current and savings accounts, which are a bank's cheapest source of funds.
- Deposits (Banking)Deposits are the funds customers place with a bank in current, savings and term accounts, forming the bank's primary and cheapest source of funding.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.