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The CASA ratio is a measure used by banks to evaluate the proportion of deposits in current and savings accounts compared to total deposits. A high CASA ratio indicates that a bank has more low-cost deposits, which are beneficial because current and savings accounts typically pay lower interest rates than fixed deposits or term accounts. Banks with a higher CASA ratio can increase profitability by reducing their overall cost of funds.
A bank with a CASA ratio of 60% means that 60% of its deposits are in current and savings accounts, which provide a cheaper source of funds compared to fixed-term deposits.
• CASA ratio measures the proportion of deposits in current and savings accounts relative to total deposits.
• A high CASA ratio is favorable for banks as it indicates more low-cost deposits.
• It helps banks reduce their overall cost of funds, increasing profitability.
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