CURRENT ACCOUNT SAVINGS ACCOUNT (CASA) 

CASA integrates the features of both current and savings accounts, allowing funds to be accessed at any time. This flexibility means it generally offers a lower interest rate compared to term deposits. For banks, CASA is a more cost-effective way to raise funds than term deposits, which offer higher interest rates. Financial institutions favor CASA because it contributes to higher profit margins.

CASA Ratio

The CASA Ratio measures the proportion of deposits in current and savings accounts relative to the bank's total deposits. A higher CASA Ratio indicates a greater share of deposits in these accounts and reflects better operational efficiency. In India, this ratio is used as a key metric to assess bank profitability.

CASA Ratio = CASA Deposits / Total Deposits

4. Types of accounts

• Banks primarily offer two types of accounts: term deposits, such as fixed or recurring deposits, and non-term deposits, including current and savings accounts.
• Term deposits are available for a specified duration, during which the bank pays a fixed interest rate, provided the funds are not withdrawn before the maturity date. For instance, if you deposit Rs 10,000 in a fixed deposit for seven years, the bank might offer an interest rate of 12 percent per annum.
• In contrast, current and savings accounts are designed for everyday transactions and remain active for as long as the account holder wishes. These accounts generally offer lower interest rates compared to term deposits, depending on the bank's policies.
• For example, ICICI Bank might offer a 4.0 percent interest rate on a savings account with a cheque book, provided a minimum balance of Rs 10,000 is maintained.
• Due to the lower interest rates associated with CASA accounts, they represent a more economical source of funds for banks. Consequently, financial analysts use the CASA ratio to evaluate a bank's financial health, as it reflects the bank's ability to secure funds at lower borrowing costs