CURRENT
ACCOUNT AND SAVING ACCOUNT: ECONOMY
NEWS
: Why CASA deposits aren’t as cheap as assumed
to be
WHAT’S
IN THE NEWS ?
In contrast, CASA deposits involve a multitude of
transactions day in and day out in terms of withdrawal, remittance, statements
of accounts, mandates, linkage to gateways and so on.
CASA
(Current Account and Savings Account):
- Definition: Funds deposited in current
and savings accounts of bank customers.
- Usage: Common in West Asia and
Southeast Asia.
Key
Features:
- Cost Efficiency: Cheaper source of funds
for banks due to lower interest rates compared to term deposits.
- Interest Rates: Savings accounts offer
more interest than current accounts.
- Transaction Volume: High transaction frequency
(withdrawals, payments, etc.).
- CASA Ratio: Percentage of total
deposits in CASA accounts, indicating a bank's liquidity and cost of
funds.
Significance:
- Stable Deposits: A higher CASA ratio
provides banks with more stable, low-cost funds for lending.
- Financial Health: Reflects a bank's ability
to raise low-cost funds, important for profitability.
Types of
Bank Accounts:
- Term Deposits: Fixed or recurring
deposits for a fixed period with a set interest rate.
- Non-term Deposits: Current and savings
accounts for daily transactions, offer lower interest compared to term
deposits.Top of Form
Source: https://www.newindianexpress.com/opinions/2024/Sep/26/why-casa-deposits-arent-as-cheap-as-assumed-to-be