Banks, especially the public sector ones, have started aggressively pursuing low-cost current account and savings account (CASA) deposits. And they are using innovation methods like deploying direct selling agents, giving perks to employees and others, multiple senior bankers told FE.
State Bank of India (SBI) Chairman Dinesh Khara said the bank has started focusing on gaining more current accounts in the last six months from the trade and commerce industry and from various trusts. “I am happy to share with you that up to March we were growing faster than any other bank, June we were growing faster and even July we are growing faster,” he said during the June-quarter earnings call.
KS Raju, MD & CEO at Canara Bank said the lender has taken a number of initiatives to garner CASA. On the first working day of the current financial year, the lender started offering salaried class customers savings bank account along with a term life insurance of between Rs 100,000 to Rs 600,000.
The bank has onboarded 310,000 customers with salary disbursing accounts. “We also introduced a relationship manager concept from July 1 onwards in 5,000 top savings bank concentrated branches, covering 80% of High-Net-Worth individuals of our bank,” he said.
Another large public sector bank chief shared similar views, saying their bank has now started appointing relationship managers even for savings account customers. Speaking at a post earnings presser, Joydeep Dutta Roy, ED at Bank of Baroda said the lender is now focusing in generating more merchant relationships and targeting more salary accounts, institutional accounts, and creating sales teams across branches to help mobilise more salary accounts and institutional accounts.
“The relationship manager concept at various verticals (is also being introduced). Whether it is corporate or MSME…The relationship manager would look at those aspects also and tie it all in as we look at the growth for CASA for this year,” he said.
CASA has come back into focus after its share in overall deposits starting slipping. Data compiled by FE showed that while almost all top five private and public sector banks generated double-digit growth in overall deposits during the quarter ended June, the share of CASA has fell across lenders.
For instance, SBI overall deposit rose 12% year-on-year (YoY) to Rs 45.31 trillion as of June end, its CASA ratio fell to 42.88% as of June 30 from 45.33% a year ago. Similarly, even as HDFC Bank’s overall deposits rose 19% YoY to Rs 19.13 trillion as of June end, its CASA ratio moderated to 42.50% from 45.80% during the same period. Similar trends were witnessed at other large banks and thus lenders are hunting for new strategies to grow their CASA book.
According to SBI’s Khara, market participants must look at banks’ CASA trajectory through three lens—pre-Covid-19 pandemic, during pandemic and post pandemic. He said that during the pre-pandemic period, CASA ratio used to be somewhere around 40% in the banking system, during pandemic it went up to 44% and post-pandemic it is somewhere around 42%– 43%.
While the CASA ratio is nearing its pre-pandemic levels, it is also important to understand that gradually savings accounts are turning into fixed deposits. Khara has also argued that many private sector banks pay higher interest of 6%-7% in their savings deposit accounts, thereby defeating the purpose of acquiring low-cost funds. “It may be termed as CASA, but I would say that SA is actually a term deposit,” Khara says.
According to Sanjay Agarwal, senior director at CareEdge Ratings, the mid-sized and small sized private banks had increased savings bank account interest rate to higher range about 5 months-6 months back and now they are either keeping the rates constant or reducing it.
“The CASA moderation will likely continue in Q2FY24 as FD rates have increased and people are parking money in the instrument rather than CASA. Further, as repricing of liabilities have started happening now and asset side repricing is mostly done, either banks will need to go slow on credit growth or their NIMs (net interest margin) would moderate,” he says.
According to CareEdge estimates, average NIM for the banking sector stood at 3.25%-3.30% during Q1FY24 and is expected to moderate by up to 5 basis points (bps) each quarter this fiscal. “NIM are currently too high and by law of average will return to their historical trend of below 3%,” he says.