What is the current account and savings account (CASA) ratio?
The current account and savings account ratio measures the proportion of a bank's total deposits that are held in the form of current or savings accounts. Given the low or zero interest paid on such accounts, a high ratio is usually good news for the bank.
Where have you heard about the current account and savings account (CASA) ratio?
As an investor, you may own bank stocks, in which case you may have read about the CASA ratio in annual reports or in analysts' notes about the institution concerned. Financial media may refer to the CASA ratio.
What you need to know about the current account and savings account (CASA) ratio?
Essentially, the CASA ratio is an indicator of how efficient is a bank's process for obtaining funds at the lowest available price. Current accounts usually pay little or no interest on cash held in them, while ordinary savings accounts, particularly those offering instant access, generally pay meagre rates of interest. Thus the higher the CASA ratio, the better the bank is proving to be at accessing funds at low cost. A lower ratio suggests the bank is not efficient in this regard as it is having to pay higher rates on more expensive types of deposits.
Find out more about the current account and savings account (CASA) ratio.
The CASA ratio is concerned with low-cost current and savings accounts, as opposed to term deposits, which are more expensive for the banks in terms of higher interest rates.