IN SEARCH OF CASA

As savers become investors, banks are grappling with a dwindling current account and savings account ratio. Is this a blip or the new reality for banks?

- TEENA JAIN KAUSHAL

NEW DELHI-BASED physiotherapist Sanjana Sharma, 42, used to keep a chunk of her earnings aside in a savings bank account to meet her emergency needs. But she no longer favours her savings account. Instead, she parks her money in fixed deposits (FDs). The reason: the growing disparity in interest rates. With FD rates as high as 7-8%, while savings account offer just around 3%, she has transitioned from being a saver to an investor.

Similarly, Noida-based Ashish Kumar, a 24-year-old software engineer, began a systematic investment plan (SIP) in a large-cap equity fund soon after he started working. Given the challenges the IT sector has faced in recent times, he has put his money into liquid funds—which may yield returns of up to 7%—for contingency needs. With average returns of 25% in the past year, he has decided to forego keeping money in a savings account.

Like Sharma and Kumar, many are abandoning savings accounts in favour of investing. Instead of letting their money sit idle, they’re opting to invest in FDs and liquid funds, or taking the plunge into equities, which have yielded much higher returns in recent years. India, once a country of savers, has transformed to one of investors, and the change has been “phenomenal,” Uday Kotak, Founder & Director of Kotak Mahindra Bank, told BT recently.

This shift has had a ripple effect in the banking industry. With more money moving out of savings accounts, the CASA (current account and savings account) ratios of banks have taken a hit. Of the total outstanding deposits (₹212.53 lakh crore) of scheduled commercial banks as of March 31, 2024, term deposits accounted for 59% (₹125.44 lakh crore), with the remaining 41% being CASA deposits. The FY24 figure is much lower than the 43.5% in FY23 or 45.2% in FY22.