CASA ratio
The CASA ratio is the share of a bank’s total deposits held in current and savings accounts, which are usually its cheapest source of money.
CASA ratio = (Current account deposits + Savings account deposits) ÷ Total deposits × 100
What it is
A bank lends out money it has borrowed from depositors. Some of those deposits are in current accounts, used by businesses, which usually pay no interest. Some are in savings accounts, which pay a low rate. The rest are mostly fixed deposits, which pay more.
CASA stands for current account plus savings account. The CASA ratio tells you what share of all deposits comes from these low-cost accounts.
How to read it
A higher CASA ratio usually means the bank pays less, on average, for its money. If it can lend at similar rates to other banks, it keeps a wider margin. That shows up in a better net interest margin.
Watch the trend. A falling CASA ratio can mean customers are moving money into fixed deposits for higher returns, which raises the bank’s cost of funds. This often happens when interest rates rise across the economy.
Limits
CASA is one piece of the picture. A bank with a high CASA ratio but poor lending decisions can still lose money through bad loans. Read CASA with NPAs and net interest margin.
Large, long-established banks with big branch networks tend to have higher CASA ratios than newer or smaller lenders, so compare banks of similar type.
Calculating the CASA ratio
A bank has total deposits of ₹1,00,000 crore. Current account deposits are ₹15,000 crore and savings account deposits are ₹27,000 crore. CASA ratio = (₹15,000 + ₹27,000) ÷ ₹1,00,000 × 100 = 42%. The other 58% is mostly fixed deposits that cost the bank more.
Common mistakes
- Treating a high CASA ratio as proof that the bank is safe.
- Comparing CASA between a large old bank and a small new lender without context.
- Ignoring a steady fall in CASA, which can squeeze margins.
Why does a higher CASA ratio usually help a bank?
- Current and savings deposits cost less than fixed deposits, so funds are cheaper
- CASA deposits cannot be withdrawn
- A higher CASA ratio means fewer bad loans
Show the answer
Current and savings deposits cost less than fixed deposits, so funds are cheaper. CASA deposits pay little or no interest, so a bank with more of them has a lower cost of funds. It says nothing directly about bad loans.
Common questions
What is a good CASA ratio?
Higher is generally better, but it varies by type of bank. Compare a bank with its own history and similar peers.
Why is CASA called low-cost deposits?
Current accounts usually pay no interest and savings accounts pay low interest, so the bank spends less on these deposits than on fixed deposits.
Does CASA matter for NBFCs?
Most NBFCs do not take current or savings deposits, so they fund themselves through borrowing instead. CASA is mainly a bank metric.
Practise reading company numbers, free
Short chapters, then real calls graded on your reasoning, not luck. No money involved.