What Is CASA? Here's Everything You Need To Know

A bank can add thousands of new deposit accounts in a quarter and still report a lower CASA ratio. That sounds odd until the deposit numbers are looked at separately. If fixed deposits grow much faster than current and savings balances, the percentage can fall even though those balances have also increased. That is the context in which CASA usually appears. It is a banking measure, not a product that a customer applies for.

Start With The Two Accounts Behind CASA

CASA stands for Current Account and Savings Account. Current accounts are used heavily by businesses for collections, supplier payments and day-to-day transactions. Under Reserve Bank of India (RBI) deposit rules, banks do not pay interest on current-account balances.

Savings accounts work differently. They are used by individuals for salary credits, bill payments, transfers and money kept readily available. Banks pay savings interest according to the rate structure they publish.

That is the basic meaning of a CASA account in banking. When current and savings deposits are added together, banks and analysts often discuss them as one pool. A customer does not open a separate CASA account.

Why The Ratio Can Move Even When Deposits Rise

Take a simple example. A bank has Rs 25,000 crore in current accounts and Rs 55,000 crore in savings accounts. Its CASA deposits are Rs 80,000 crore. If total deposits are Rs 2 lakh crore, the CASA ratio is 40 per cent.

Now assume current and savings balances rise to Rs 84,000 crore, but total deposits jump to Rs 2.2 lakh crore because customers put much more money into fixed deposits. The new CASA ratio is about 38.2 per cent. CASA deposits went up, yet the ratio went down.

This is why the question of what the CASA ratio is needs more than the formula. The percentage only becomes useful after looking at what happened to the other deposits during the same period.

What Makes CASA Useful To A Bank

Current and savings deposits form part of a bank's everyday funding base. Their cost differs from that of term deposits. Current-account balances do not carry interest, while savings balances are priced separately from fixed deposits.

That mix is one reason CASA in banking receives attention during results season. If a bank relies heavily on higher-cost term deposits, its overall funding cost can look different from that of a bank with a larger share of current and savings balances.

The benefits of CASA accounts for a bank are therefore mostly linked to funding mix and customer activity. The number still sits alongside many other figures, including deposit growth, liquidity, credit quality and lending margins.

Customers Usually Care About Something Else

A person choosing where to keep salary income will rarely decide based on a bank's CASA ratio. The practical checks are more ordinary: app reliability, nearby branches, service charges, minimum-balance conditions and the savings account interest rate.

Savings account eligibility also matters, because one account variant may be meant for salaried customers while another may have different balance or documentation conditions. A shop owner looking for a current account will have another list altogether, such as cash deposits, payment collections and transaction limits.

For that customer, an understanding of CASA is useful background. It is not the feature being used at the counter or on the app.

Quarterly CASA Numbers Need A Little Context

CASA can move around because customer balances move around. Businesses may hold larger operating balances near salary dates or tax payments. Retail customers may shift idle money into fixed deposits after a bank raises term-deposit rates. Large institutional balances can also change quickly.

So a one-quarter rise or fall does not explain itself. Looking at two or three reporting periods, along with the absolute current, savings and term-deposit numbers, gives a much better sense of what changed.

A bank could report a lower ratio after a period of strong fixed-deposit mobilisation. Another could report a higher ratio because term deposits grew slowly. The same percentage movement can come from very different deposit behaviour.

CASA is simply current-account and savings-account money viewed together. The ratio shows how much of total deposits comes from those two buckets.

If the percentage moves, the useful next step is to look at the rupee deposits behind it. For a customer opening an account, the day-to-day product terms still deserve far more attention than the bank-level ratio.