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Banks continue to struggle for CASA share in Q2

October 05, 2023

Banks continue to struggle for CASA share in Q2
Commercial banks’ share of current accounts and savings accounts (CASA) in deposits eroded in the second quarter ended September 2023 as customers moved money to term deposits, which give higher interest rates.

According to CARE Ratings, the share of CASA in commercial banks was 41.6 per cent as of June 30, 2023. The share was 44.1 per cent as of September 2022. The decline in the ratio has come as banks focused on term deposits.
 
CASA are used for daily operations by businesses, households, or individuals.
 
Generally banks do not pay interest on money in current accounts. On saving accounts the rates are low. CASA is a relatively cheap source of funds for banks. The higher the share of CASA in deposits, the lower is the cost of funds for banks. This helps them maintain better margins and gives them the room to offer viable lending rates in competitive markets.
 
Senior bankers said the share of CASA continued to decline even as the system entered the third quarter this financial year.
 
Getting money into savings deposits has become challenging and will remain so in the coming quarters as banks battle for resources to meet the demand for credit.

While a shift in money to term deposits due to higher interest rates remains the main reason, an increase in consumption, which is paid out of money in savings accounts, is a reason for challenges, said a senior State Bank of India executive. 
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