Private banks see low-cost deposits’ share shrink in Q1

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MUMBAI : Private sector banks saw the share of low-cost current and savings account (Casa) deposits contract in the first three months of the current financial year as customers chasing better returns preferred to park funds in fixed deposits, showed business updates by individual banks. The trend was visible across large lenders like HDFC Bank as well as smaller ones like IndusInd Bank, IDFC First Bank, Federal Bank and Yes Bank, business updates by individual banks showed. IDFC First Bank and Bandhan Bank recorded the sharpest sequential dip in Casa ratio, with a decline of 330 basis points (bps) in the first quarter.

While 46.5% of deposits at IDFC First were in current and savings accounts, it stood at 36% at Bandhan Bank. At India’s largest private lender HDFC Bank, the Casa ratio dropped 190 bps from the March quarter to 42.5%. “Many banks have reported historic low Casa ratios in their business updates.

This is happening because banks are aggressively looking to raise deposits at higher cost to fund higher loan growth. Also, because of very high demand for deposits from HDFC Bank due to the transition of balance sheet following the HDFC merger, other banks too felt the pressure to aggressively raise deposits," said Asutosh Mishra, head of research at Ashika Stock Broking. A stagnation in savings account rates at a time fixed deposit rates are increasing has pushed customers to park their funds in term deposits.

The weighted average term deposit rate for new deposits stood at 6.32% in May, showed data from RBI. While savings accounts pay in the range of 2.7% to 4%, current accounts pay no interest; and the higher the percentage of Casa in a bank’s deposit base, the better it is for the bank. A higher share of Casa