what is casa: Understand Key Insights, Meaning, Working and Benefits

CASA full form in banking is Current Account Savings Account. It is a type of bank account that some financial institutions offer. As the name suggests, it provides the combined facilities of a current account as well as a savings account. These types of accounts offer an excellent way to increase your savings and build a sizeable corpus for the future.

Know how CASA accounts work, their benefits to customers as well as banks, and much more.

How CASA Works?

As mentioned above, you can use this account just like you use a regular current or savings account. Here are some essential points:

• A CASA differs from term deposits, as it lets you carry out everyday banking transactions and provides an option to save funds.
• Unlike term deposits with a fixed maturity date, a CASA does not expire.
• You can keep the account active as long as you wish to keep it open.
• This account offers flexibility in terms of withdrawals and deposits, allowing you to manage your finances conveniently without restrictions.
• These accounts typically offer lower interest rates than term deposits.

Also Read: What is a current account in a bank?

CASA Ratio and Its Calculation

The Current Account Savings Account ratio, or CASA ratio, is a critical indicator of a bank’s financial health. Here are some key points to know:

• It reflects the bank’s liquidity and its ability to manage its cash reserves in an effective way.
• This ratio is the proportion of the current and savings account deposits of a bank to the total deposits it holds.
• A higher CASA ratio shows that a bank has a significant proportion of stable deposits that they can use for the purpose of lending and investing.
• A higher ratio also reflects that the cost of funds is on the lower side, which can help enhance earnings.
• The formula for the CASA ratio is CASA Deposits that a bank holds /Total deposits that the bank holds.

Also Read: What is an IFSC Code

Benefits of CASA 

You must be wondering why CASA is important for banks and how they benefit customers of the bank. Here are the benefits these accounts offer:

For Banks:

• Cost-Effective Source of Funds

By offering these accounts, banks benefit from a cheaper way to raise funds as compared to issuing term deposits. This is cheaper for them as the interest they provide on CASA is lower than the rates they offer on term deposits. This enhances the bank’s net interest income (NII). 

• Customer Relationships

Providing the facility of opening CASA also helps banks strengthen their relationship with customers over the long term. It helps boost loyalty and trust, leading to more business opportunities as well as mutual benefits.

• Metric to Assess Financial Health

The Current Account Savings Account ratio serves as a critical indicator of the overall financial health of the bank. A bank with a higher CASA ratio reflects that it holds a high proportion of stable deposits. They can utilise these deposits for investing and lending purposes.

Also Read: Difference Between Salary Account Vs Savings Account

For Customers:

• Offers a Convenient Banking Experience

CASA offers you the benefits of both current and saving accounts. This way, you enjoy a flexible and easy way to manage your banking requirements and carry out transactions on your own terms. 

• Provides Interest on Your Deposits

You earn interest on the deposits you make into this account. This way, you can enhance your savings to meet your future financial goals while carrying out other banking activities. 

With this information, you can decide if opening this account is suitable for you. In case you need funds to manage any unforeseen or planned expenses, consider getting an Instant Cash Loan from Fibe. You can get financing of up to ₹5 lakhs with a flexible repayment tenure of 36 months. 

After applying, you benefit from quick processing and fund disbursal. Install the Fibe Personal Loan App and get the required funds instantly without any hassles.

FAQs on CASA Accounts

What is the work of CASA in banks?

Here is how CASA is beneficial for banks:

• CASA offers a low-cost source of funds for banks
• These accounts provide banks with a stable source of liquidity
• Banks can foster long-term relationships with customers via these accounts
• The CASA ratio reflects the bank’s ability to manage its funding costs

What is a CASA transaction?

A CASA transaction refers to any banking activity that you carry out using your account, such as:

• Deposits to the account
• Withdrawals from the account

How is CASA calculated?

The formula to calculate the CASA ratio is:

• CASA Ratio = CASA deposits/Total deposits

What is CASA used for?

You can use a CASA account just like you would use a normal savings or current account. You can make deposits, carry out withdrawals, etc.