Higher-paying FDs leave banks’ CASA piles depleted

Banks are expected to report a drop in CASA ratio — the proportion of current account and savings account deposits in a bank’s total deposits — for the quarter ended June.

HDFC Bank, one of the strongest players in the segment, has reported a drop in CASA ratio to 49.1% from 51% at the end of last fiscal.

Kotak Mahindra Bank saw its CASA ratio drop to 27% from 30% as of March 31.

For Axis Bank and Union Bank, the drop was marginal at 40.53% and 31.51% as against 41%and 31.76%, respectively as on March 31.

Surprisingly, even IDBI Bank, which waived all service charges last September in a bid to improve the proportion of such deposits, has seen the ratio drop below 20% compared with 20.88% as on March 31.

Most other banks are yet to declare their results for the quarter.
CASA deposits are important in a bank’s scheme of things, mainly because of the lower costs they involve — current account is non-interest bearing, while the interest payable on savings accounts is currently 4% a year, less than half of what they pay on term deposits.

The first quarter is typically a dull one, with fewer transactions taking place. But this isn’t the only reason analysts expect CASA ratios to be lower.

“Bank fixed deposit rates have gone up, due to which customers are moving their money there rather than keeping it in savings account,” said Vaibhav Agrawal, vice-president (Research), Angel Broking.

Currently, bank fixed deposits are an attractive option for investors — one-year deposits are fetching at least 9% rate of interest, with a few banks even offering double-digit returns.

“Savings account holders park their money in fixed deposits. They are mostly parking it in one-year fixed deposits,” said P N Ramaswami, general manager, Bank of India.

Current account holders are keeping lesser funds in their accounts, too.

Rajat Monga, chief financial officer, Yes Bank said money movement typically reduces during the April-June quarter. “People do not have the visibility to transact, due to which borrowers use the money to pay back their loans.”

But in case of Yes Bank, the CASA ratio went up marginally to 10.9% in the first quarter of FY12 compared with 10.3% as on March 31, 2011.

Kotak Mahindra Bank’s group chief financial officer Jaimin Bhatt said, “In March, corporates take away money from mutual funds and put it in their current account. These corporates take out this money from their current account in April.”

Analysts see the trend continuing well into the current quarter.
“CASA deposit growth may continue to be slow even in the second quarter,” said Chaitra Bhat, analyst with LKP Securities, painting a less-than-promising near-term picture.