RBI caution banks regarding decline in CASA banks’ total deposits

The Reserve Bank of India (RBI) has cautioned banks regarding the decline in share of current account and savings account balances (CASA) in banks’ total deposits. The apex bank said decline in CASA might create a defying situation for the banking sector as CASA deposits is the cheapest source of funds for banking sector.

In case of public sector banks the share of CASA in total deposits keep on declining as large numbers of account holders are transferring their savings to fixed deposits.

In the quarterly report on trends and progress of banking in India RBI has cautioned banks, “In case of drying up of this source alternate sourc­es may be difficult and expensive. In the context of the impending revival of ec­onomic growth with commensurate increase in the credit needs of the economy, the banking industry may require to take initiatives to attract more CASA deposits”.

According to a senior SBI official, “While CASA in absolute terms has not come down for the public sector banks but in percentage terms it has dipped as public sector banks mobilized a lot of te­rm deposits last year which resulted in CASA as percentage of total deposits going down. While in private and foreign banks, the CA­SA ratio has improved as th­ey did not mobilize term deposits”. In case of SBI out of the total deposits, the share of term deposits is 60 per cent, wholesale deposits form 15 per cent while the remaining is CASA.

While in case of Schedule Commercial Ban­ks (SCBs), by the end of March 2009 the CASA deposits has recorded a gro­wth rate of 13.4 per cent as against of 20.2 per cent in the preceding year, registering a decline in growth. In nationalized ban­ks growth of CASA deposits has recorded a marginal decline, in case of private sector banks and foreign banks there has been steep fall. In 2008-09 for SBI and its associates, growth of CASA deposits stood at the same level as in the previous year.

In case of foreign banks the share of current account deposits is higher than saving bank deposits, while for other bank groups, the share of saving bank deposits is higher. Further, by the end March 2009, the share of demand deposits in CASA deposits had declined, in comparison to the preceding year for all the other bank groups. In growth terms, current deposits and saving bank deposits have shown an increase of 6.7 per cent and 17.4 per cent in March 2009 as against to 24.6 per cent and 17.8 per cent in March 2008.