CASA Ratio in Banking: Full Form, Definition & Formula

In 2025, Indian banks are witnessing a dip in their CASA ratios, slipping from 43.7% in FY22 to 38.9% in FY25. But what does this really mean? The CASA ratio, short for Current Account and Savings Account ratio, is a key indicator of a bank’s financial strength and profitability. 

It reflects how much of the bank’s deposits come from low-cost sources like current and savings accounts, which directly impacts margins and overall performance.

In this article, we will break down everything you need to know about CASA: its definition, how it is calculated, why it matters, and the key differences between current accounts and savings accounts.

Quick Synopsis 

• CASA ratio in banking is how much of a bank’s deposits come from low-cost sources.
• Low-cost sources mean current and savings accounts.
• A higher CASA ratio boosts bank profitability by lowering funding costs.
• Public sector banks are now beating private banks in CASA strength in this financial year.

Understanding CASA and CASA Ratio 

The CASA ratio highlights the share of low-cost deposits that banks rely on for funding. These primarily come from current and savings accounts, where current accounts earn no interest and savings accounts pay only 2.5%–3.5%. 

In contrast, term deposits are much costlier, with interest rates ranging from 6.0% to 7.25%. As of March 2025, the overall CASA ratio for Indian banks declined by 160 basis points compared to the previous year. 

Interestingly, public sector banks are now outperforming private banks, with CASA ratios between 31% and 54%, while private banks stand at 24%–47%.

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Formula to Calculate CASA Ratio 

CASA ratio in the banking formula is as follows:

• CASA Ratio = (CASA Deposits ÷ Total Deposits) × 100

CASA Ratio in Banking Example:

If a bank has ₹50,000 crores in CASA deposits and ₹1,00,00 crores in total deposits, then:

• CASA Ratio = (50,000 ÷ 1,00,000) × 100 = 50%

This means 50% of the bank’s deposits are low-cost.

Importance of CASA Ratio in Banking 

The CASA ratio directly affects a bank’s net interest margin (NIM). It is the difference between what it earns from lending and what it pays on deposits.

• Banks usually lend at rates above 10%.
• They pay only around 3.5% on savings deposits.

So, a high CASA ratio means banks can lend at competitive rates and still earn healthy profits.

Major banks, such as HDFC Bank and IndusInd Bank lost around 11 percentage points between Q1FY22 and Q1FY26. Kotak Mahindra Bank saw the biggest fall by more than 19 percentage points. 

While the CASA ratio in banking directly impacts the margins of banks, it also indicates that Indian citizens are becoming financially smart, as they are preferring both investing and savings.

The CASA ratio in banking is a key signal of a bank’s financial health. With ratios falling and funding costs rising, banks need to focus on building CASA deposits. A strong CASA ratio helps them stay profitable and competitive in India’s changing financial environment.

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