After witnessing a decline in the current account-savings account (CASA) ratio over the past couple of quarters, several banks have started to witness improvement in these low-cost deposits in the fourth quarter. According to the provisional figures released recently, HDFC Bank, Punjab National Bank, Yes Bank, Bank of Maharashtra, RBL Bank have improved CASA ratio in the fourth quarter.
HDFC Bank’s CASA ratio has improved to 38.2% in the fourth quarter from 37.7% in the third quarter, while for Yes Bank, this ratio increased to 30.9% from 29.70% in the same period. Bank of Maharashtra’s CASA ratio improved 52.73% in Q4 from 50.19% in Q3 while RBL Bank raised this ratio to 35.2% from 33.8%.
Lenders are trying to woo depositors by offering multiple benefits with savings accounts. “We have started a campaign to attract women depositors. For women’s savings account, the bank is offering personal accident insurance of upto Rs 26 lakh, 15% discount on locker rental charges, unlimited free locker operations, a free platinum rupay card and a few other benefits,” a senior official of Canara Bank told FE.
Punjab National Bank has increased its CASA deposits to Rs 5.5 trillion at the end of March 31, 2024 from Rs 5.4 trillion at the end December 31, 2023, reflecting a growth of nearly 1%.
Banks prefer to keep high levels of current and savings accounts as these are sticky and cheap sources of funds for them. Investors also keep a close watch on banks’ CASA ratio as a higher ratio indicates that the cost of funds of a bank is lower, which helps in boosting its earnings.
Analysts say that banks will remain under pressure to raise their CASA deposits as it will help protect their net interest margins. Easing liquidity deficit may provide some comfort for banks as it will reduce their cost of raising short term funds.
“Liquidity in the banking system has turned to surplus in February which is a positive development for banks. Liquidity is unlikely to remain in deficit mode in the first half of the current fiscal which will keep the cost of raising short term funds relatively low,” said a banking analyst of a brokerage firm. “Banks will have less pressure to raise interest on term deposits,” he said.
He added that some lenders may continue to see a decline in CASA ratio in the fourth quarter.
System liquidity deficit – as measured by net injections under the liquidity adjustment facility – declined to Rs 1 trillion during February-March as compared to Rs 1.61 trillion in December-January.