Page 30 - BANKING FINANCE APRIL 2024

ARTICLE

INNOVATIVE DEPOSITS: A

STRATEGIC BLUEPRINT

FOR PUBLIC SECTOR

BANKS TO HARNESS

LOW-COST FUNDS AND

DRIVE SUCCESSFUL

INVESTMENTS

Introduction: A higher CASA ratio indicates that a greater portion of the
bank's deposits come from current and savings accounts,
The banking landscape in India is undergoing a paradigm
which is a cost-effective source of funding. Savings bank
shift, and one of the primary challenges faced by public
deposits only incur an interest rate of 3.5%, whereas many
sector banks is the constant struggle to enhance their
banks do not pay any interest on current account deposits.
Current Account and Savings Account (CASA) base. CASA
Therefore, a larger CASA ratio improves the net interest
plays a pivotal role in determining the cost of funds for banks,
margin, a measure of the bank's improved operating
as it represents the proportion of low-cost deposits in
efficiency. This results in higher profitability. Net interest
relation to total deposits. If a substantial portion of bank
margin is the difference between the total interest income
deposits comes from these funds, this means that the bank
earned on assets or advances and the interest expense paid
will receive these funds at a relatively lower price. It is
on term deposits and demand deposits and is expressed as
generally accepted that a higher CASA indicates an excellent
a percentage of the average value of income.
net interest margin. In India, it is used as one of the
measures to assess the profitability of the bank.
The increase in CASA's revenues will improve the net interest
margin as fund costs are relatively cheaper. The amount of
current and savings bank deposits at banks has increased
since the demonetization. Money from unaccounted for and
accounted for taxes, in the form of demonetized cash, was
coming into the banks, and CASA deposits have increased
significantly. In particular, it helped the banks' current, and
savings accounts grow in an indirect manner.

BANKING FINANCE | APRIL | 2024 | 27