what is casa in banking? Definition of Casa Banking, Casa Banking Meaning Everything you need to know about casa banking.
What is casa banking – We all know saving and current account but most people do not know exactly what it is. The saving account gets higher interest rate than the current account. The saving account is opened by individual people whose purpose is to save. The current account is opened by a company whose purpose is to transact on a large scale. There are limits to transactions on a saving account, but no matter how many transactions are made on the current account, there is no problem.
Banks offer two types of accounts to their customers: Term deposit and non-term deposit. The term deposit includes fixed deposit and recurring deposit. Non term deposits include current account and saving account. In term deposits the bank promises to charge the customer a certain amount for a certain period of time and pay interest on it.
what is casa in banking terms
what is casa in banking it is very important to understand CASA means current account saving account. This is an important feature of a bank which banks use to attract customers. The current account and the savings account are linked, hence the name CASA deposit. Banks pay less interest on saving account approximately 3.5% to 4%. This interest rate is lower than fixed deposit. Banks benefit from opening, so banks place more emphasis on opening CASA deposit. CASA deposit is an important source to increase banks’ funds. We can also determine the health of the bank from the CASA deposit.
what is casa ratio in banking
After knowing what is casa in banking the next important part is knowing casa ratio. The casa ratio shows how much of the total bank deposits are in current accounts and savings account. High casa ratio means that a large part of the total deposits is in the saving account and current account.
How to calculate casa ratio
Casa ratio % = casa deposit ÷ total deposit
what is casa in banking and how to calculate casa ratio, suppose x bank’s total deposit is 100000 cr and saving deposit is 40000 cr and current deposit is 30000cr then the calculation of x bank’s casa ratio will be done as follows
Casa ratio% = casa deposit ÷ total deposit
Casa ratio% = (30000 + 40000) 100000
Casa ratio% = 70000 ÷ 100000
Casa ratio% = 70%
So the casa ratio of X Bank is 70%. This means that 70% of the total deposit is between current and saving deposit.
Disadvantages of casa
With regard to term deposits in the bank, the bank is sure that these deposits will remain with the bank for a certain period of time, but the casa deposits have to be returned to the bank at the time of request.
How to increase casa ratio?
what is casa in banking and how to increase casa ratio – Banks can attract depositors by paying higher interest rates to their depositors. Therefore, current and saving accounts are opened by more people and casa ratio is increased.
Importance of casa
The casa ratio is important to know how strong a bank is financially. Understands the financial health of the bank due to casa ratio. The customer can make a deposit by comparing the casa ratio of two banks to see which bank is more financially strong.
A high casa ratio of a bank is considered to be good creditworthiness of the bank. The bank reduces interest on current account and savings account, so casa deposits are a very cheap option for raising funds.
what is casa in banking?