At a time when the banking sector is facing the problem of declining current account-savings accounts (CASA), few lenders have bucked the trend by improving the share of these accounts. Bank of Baroda, Bank of India, Yes Bank, IDFC First Bank, Punjab & Sind Bank, Tamilnad Mercantile Bank and DCB Bank have witnessed quarter-on-quarter increase in their CASA ratios for the third quarter.
Tamilnad Mercantile Bank has seen the biggest rise of 200 basis points in its CASA ratio while Punjab & Sind Bank has improved the same by 158 bps. Other banks have seen an increase of 30-81 bps during the quarter. As the competition intensifies for customer acquisition, banks are putting in efforts to attract new accounts.
“We are very clear now that we are not going to acquire clients from the open market. We have a huge number of clients who are using our products and services, but do not have accounts with us,” Dheeraj Sanghi, country head branch and affluent banking, retail banking, Yes Bank, told FE. “Our strategy is to open accounts of the existing customers who are not keeping CASA accounts with us.”
Instead of opening account of an individual customer, the bank is focusing on opening family accounts along with multiple product holdings, Sanghi said.
Banks prefer to keep high level of CASA as these are sticky and a cheap source of funds for them. Investors also keep a close watch on banks’ CASA ratios as a higher ratio indicates that the cost of funds of a bank is lower, which helps boost its earnings. Tight liquidity in the banking system and a strong credit growth have compelled lenders to acquire new customers and mobilise deposits to fund the credit growth.
“As a strategy, we look at around 40% as CASA that we need to maintain. So, we will try to figure out what best we can do within that strategy. But, clearly, the focus is on retail deposit,” said Debadatta Chand, managing director and CEO, Bank of Baroda, in an earnings call.
“Bank of Baroda has 8,000 branches and they are meant for raising low-cost resources. We will try to raise more retail deposit and more CASA, and at the same time, try to maintain the CASA ratio around 40%,” Chand said.
Experts say only raising deposit rates is not enough and banks should focus on client servicing and developing long-term relations with customers.
While digital channels can generate leads on prospective customers, banks will earn customer loyalty by establishing relations, say bankers.
“We want human touch while opening CASA. The lead generation and the process of opening the account is fully digital, but we want human connect with the customer at the time of account opening. Our team meets customers for opening a new account,” said Sanghi.
Over the past one year, banks have raised deposits rates multiple times to lure customers. Banks are likely to struggle with the problem of falling CASA ratio as high interest on fixed deposits will encourage customers to shift their funds from savings and current accounts to high-yielding FDs.