The decline in CASA deposits of banks, customers are shifting towards fixed deposits

CASA deposits of banks have declined by Rs 5,900 crore as customers are shifting towards high-interest rate fixed deposits (FDs). At the same time, fixed deposits have increased by 10 per cent. CASA deposits are expected to improve in the next financial year due to RBI's repo rate cut, as banks may have to reduce interest rates on FDs.

CASA deposits of banks have declined by Rs 5,900 crore

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CASA Deposits: Current account and savings account (CASA) deposits of banks declined by Rs 5,900 crore in the first nine months of the current financial year. It was at an increase of Rs 42,000 crore in the same period last year. The main reason for this is that depositors are shifting their funds to high-interest FDs. Low-cost CASA deposits declined from Rs 83.50 lakh crore at the end of March 2024 to Rs 83.44 lakh crore in December 2024. In contrast, CASA deposits increased from Rs 78.27 lakh crore to Rs 78.69 lakh crore in the same period last year.

Fixed deposit boom

Fixed deposits (FDs) have grown by about 10 per cent in the first nine months of the financial year 2024-25. Banks have increased interest rates to attract customers due to the liquidity crisis. It has been the trend of the industry that whenever the difference between the interest rate of savings account and the interest rate of fixed deposit increases, customers shift to fixed deposits for higher returns. The same is happening at this time as well.

CASA declines, FD strengthens

CASA deposits are important for banks as they are a cheap and stable source of funds. However, fixed deposits have registered an increase. FDs have reached Rs 134.2 lakh crore by December 2024, while in December 2023 it was Rs 122.6 lakh crore.

The situation is expected to improve in the next financial year

According to the report of Financial Express, CASA deposits will see improvement in the next financial year. There is a possibility of reduction in interest rates in the next financial year, which will reduce the difference between CASA and FD and improve CASA deposits.

Impact of RBI cut

RBI reduced the repo rate by 25 basis points in February. A further reduction of 50-75 basis points is expected in the next financial year. This may also reduce the interest rates offered by banks on fixed deposits, which may lead to an increase in CASA deposits again.