How do you read CASA ratio?

Above 40% is strong, 30% to 40% is typical, and below 30% the bank is paying up for its money. On the scale used here, below 30% reads as low, 30% to 40% reads as typical, and 40% and above reads as strong. Higher is usually better.

CASA ratio: what it means and how to read it

What is CASA ratio?

The share of a bank's deposits held in current and savings accounts, which pay little or no interest, rather than in fixed deposits.

Current accounts pay no interest and savings accounts pay only a few percent, while fixed deposits cost a bank far more. The larger the share of the cheap kind, the lower the bank's cost of funds, and that advantage shows up directly in the net interest margin.

These balances come from salary accounts, business accounts and long customer relationships, which take years and a wide branch or digital network to build. That is why a high CASA ratio is hard for a rival to copy. It tends to fall when deposit rates are high, as savers move money into fixed deposits.

How it is calculated

CASA ratio = (current account + savings account deposits) ÷ total deposits, as a percentage.

A worked example

Deposits of ₹2,00,000 Cr, of which ₹84,000 Cr sits in current and savings accounts: CASA ratio = 42%.

Why does CASA ratio matter?

Cheap deposits are a bank's most durable advantage. They let it lend at competitive rates and still keep a healthy margin.

What is a good CASA ratio?

Above 40% is strong, 30% to 40% is typical, and below 30% the bank is paying up for its money.

Above 40% is a strong franchise. The figure applies to banks only; NBFCs and housing finance companies do not take current or savings deposits.

Reading scale

In %

Low

Typical

Strong

0%30%40%60%+

On the scale used here, below 30% reads as low, 30% to 40% reads as typical, and 40% and above reads as strong.

Higher is usually better.

What are the common mistakes with CASA ratio?

Reading it for a non-bank lender.

Ignoring the trend. A ratio sliding for several years means the cost advantage is eroding.

Is this lender sound, and does it earn enough for the risk it takes?

A bank's raw material is other people's money, so the ratios that judge a factory misread it. These are the figures that matter for banks, NBFCs and housing finance companies: what they earn on lending, how many loans have gone bad, how well they are cushioned against losses, and how cheaply they fund themselves.