Several banks have observed an improvement in their current account-savings account (CASA) ratios in the fourth quarter, following a decline over the previous quarters amid rising liquidity in the system.
The shift towards surplus liquidity in the banking system is expected to persist in the first half of the current fiscal year, thereby alleviating pressure on banks to raise interest rates on term deposits.
According to recent provisional figures, HDFC Bank, Punjab National Bank, Yes Bank, Bank of Maharashtra, and RBL Bank have reported an uptick in their CASA ratios during this period.
HDFC Bank’s CASA ratio rose to 38.2% in the fourth quarter from 37.7% in the third quarter, while Yes Bank saw an increase to 30.9% from 29.70% in the same period. Similarly, Bank of Maharashtra’s CASA ratio improved to 52.73% in Q4 from 50.19% in Q3, and RBL Bank raised its ratio to 35.2% from 33.8%.
Punjab National Bank has seen an increase in its CASA deposits to Rs 5.5 trillion as of March 31, 2024, up from Rs 5.4 trillion at the end of December 31, 2023, reflecting a growth of nearly 1%.
Raising deposits
Maintaining high levels of current and savings accounts is preferred by banks as these deposits are considered sticky and inexpensive sources of funds. Analysts emphasize the importance of banks’ CASA ratio, as a higher ratio implies lower funding costs for the bank, ultimately boosting its earnings.
To attract depositors, banks are offering various benefits with savings accounts. For instance, Canara Bank has initiated a campaign targeting women depositors, offering benefits such as personal accident insurance of up to Rs 26 lakh, discounts on locker rental charges, free locker operations, a free platinum Rupay card, among others.
Furthermore, analysts anticipate that banks will continue to focus on increasing their CASA deposits to safeguard their net interest margins. The easing liquidity deficit may offer some relief to banks by reducing their costs of raising short-term funds.
Despite these positive developments, some lenders may still experience a decline in their CASA ratio in the fourth quarter.
