Banking & NBFCs · Daily brief
The mix of current and savings account deposits shapes a bank's cost of funds — and how aggressively it can price loans without hurting margins.
CASA — Current Account plus Savings Account — is the cheapest source of funds available to Indian banks, cheaper than any external funding route.
A savings account typically costs a bank around 3.5% to 4%. A current account costs almost nothing. Banks with a higher share of these deposits carry a lower overall cost of funds.
That lower cost of funds gives a bank room to offer sharper loan pricing, absorb interest rate pressure, and still protect its net interest margins (NIMs).
The reverse also holds: when CASA weakens and deposit costs rise, a bank's ability to price loans aggressively and approve them freely can tighten.
Borrowers typically see only the final loan rate. The CASA position is the funding engine behind that rate that determines how sustainable or aggressive it can be.
Sources
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