BANKING AFFAIRS

Detailed explanation-1: -Current and Savings Account, or CASA, deposits are cheaper money that banks raise from depositors. These deposits help a bank lower its cost of funds compared with the relatively expensive term deposits. Term deposits carry higher interest (5-7% currently) than current and savings account deposits (3-4%).

Detailed explanation-2: -Definition: CASA stands for Current Account and Savings Account which is mostly used in West Asia and South-east Asia. CASA deposit is the amount of money that gets deposited in the current and savings accounts of bank customers. It is the cheapest and major source of funds for banks.

Detailed explanation-3: -CASA ratio of a bank is the ratio of deposits in current and saving accounts to total deposits. A higher CASA ratio indicates a lower cost of funds, because banks do not usually give any interests on current account deposits and the interest on saving accounts is usually very low 3-4%.

Detailed explanation-4: -Banks can increase CASA ratio by offering a higher rate of interest on deposits which can attract more deposits, on the other hand it will have to pay higher interest rates to the depositors.