The Current Account Savings Account (CASA) ratio is a key banking sector metric that measures the proportion of a bank's total deposits that are held in current accounts (zero interest) and savings accounts (low interest, typically 3% to 4% per annum) — as opposed to fixed deposits and recurring deposits which pay higher interest rates. CASA Ratio = (Current Account Deposits + Savings Account Deposits) ÷ Total Deposits × 100. A higher CASA ratio is strongly positive for a bank's profitability because it lowers the bank's average cost of funds — CASA deposits are significantly cheaper than fixed deposits, improving net interest margin (NIM). Indian banks with high CASA ratios — such as HDFC Bank (consistently above 40%), Kotak Mahindra Bank, and Axis Bank — benefit from a structural cost-of-funds advantage that supports superior NIM and return on equity versus peers with predominantly term deposit-funded balance sheets. CASA ratios tend to compress during high-interest-rate environments (when depositors shift from low-yield savings accounts to higher-yielding fixed deposits) and expand during low-rate environments. For investors analysing Indian banking stocks, the CASA ratio is one of the most important structural profitability indicators — banks with sustainable CASA franchises built on deep retail relationships and wide branch networks command premium valuations over peers that rely primarily on bulk fixed deposits for funding.
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