Banks, which had been witnessing a flight of deposits — especially from low-cost CASA (current account and savings account) funds — since the pandemic, are now heaving a sigh of relief, with almost all of them reporting an accretion in these deposits in the September quarter, both year-on-year and sequentially.
The industry leader, State Bank of India (SBI), saw its CASA ratio rise to 39.63% in the second quarter, up from 39.36% in Q1, though marginally down from 40.03% a year ago.
The bank, which commands around 20% of system-wide deposits, grew total deposits by 9.3%, while CASA deposits rose 8.1%, helping it bring down its cost-to-income ratio to 49.28% in Q2 from 47.71% in Q1 and 48.51% a year earlier. SBI also logged the highest-ever quarterly profit among Indian companies at Rs 20,160 crore, up 10%.
ICICI Bank’s CASA ratio was flat at 39.2% in Q2, higher than 38.7% in the previous quarter. Its average current account deposits rose 12.6% year-on-year, while average savings account deposits increased 8.5%. Total deposits grew 9.1% during the quarter.
The second-largest public sector lender, Bank of Baroda, saw its CASA ratio decline to 38.42% in Q2 from 39.84% a year ago and 39.33% in Q1. However, its overall CASA deposits increased 5% during the quarter.
The third-largest state-run bank, Punjab National Bank (PNB), reported its low-cost deposit ratio rising to 37.29% in Q2 from 36.99% in Q1, though lower than 39.31% a year earlier. The bank’s CASA growth was driven by a 4.2% rise in savings deposits and a 9% increase in current account deposits, taking overall deposits up 4.7%.
The second-largest bank, HDFC Bank, however, was an exception, with its CASA ratio falling to 33.9% in Q2 from 38.2% in Q1 and 35.34% a year ago. This decline was not due to deposit mobilisation challenges but was attributed to the reverse merger with its parent HDFC in July 2024, which brought in high-cost term deposits. Nonetheless, the bank reported average CASA deposit growth of 8.5% year-on-year, up from 8% a year ago and 1.9% sequentially.
Axis Bank, meanwhile, saw its CASA ratio at 40%, down from 41.8% a year earlier but flat sequentially. The third-largest private lender’s total deposits rose 9% year-on-year.
CASA deposits provide cheaper funds to banks. Current accounts earn no interest for depositors, while savings accounts offer a low rate of 2.5–3%, compared to 6–6.5% on one-year term deposits.
The industry leaders — SBI, HDFC Bank, and ICICI Bank — offer the lowest rate on savings deposits at 2.50%, down from 2.75% till March, while others offer slightly higher. The only drawback of CASA funds is that customers can withdraw their money anytime, without notice.
A higher CASA ratio helps banks lower interest expenses, thereby improving their net interest margins (NIMs).
What’s more, banks are also witnessing an upswing in their average end-of-day CASA balances, while total deposits have grown nearly in double digits during the reporting quarter — a trend that has also supported healthy growth in new loan disbursements.