Saturday, November 9, 2024

Banks’ CASA ratio drops as clients opt for equity, MFs

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A man walks outside a branch of IndusInd Bank in New Delhi, September 23, 2024. (Reuters)

CHENNAI: The Indian banking sector is experiencing a decline in the current account and savings account ratio, impacting a significant source of low or no-cost funds for lenders. While CASA customers are exploring idle bank savings in mutual funds, gold, equity and SIP for better returns, banks, in turn, are attempting to retain the amount within their system by enhancing interest rates on fixed deposits and opening new accounts.
An analysis of Sept quarter results reveals that several public and private banks are recording a drop in their CASA ratios on both a quarterly and an yearly basis. For instance, Union Bank of India reported a drop in its CASA ratio from 34.7% in Sept 2023 to 32.7% in Sept 2024. Indian Overseas Bank saw a dip in the ratio from 43.7% to 42.4% over the same period. City Union Bank’s CASA percent on total deposits stood at 29% during Q2 FY25 – down from 31% in Q4 FY24.
“There has been a difference between credit and deposit rate growth rates… Money is shifting from bank deposits to other financial instruments that is putting pressure on deposits. Some banks have pressure on their net interest margin due to the decline in their CASA ratio,” Yuvraj Choudhary, research analyst at Anand Rathi Institutional Equities, said.





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