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CASA Takes a Dip

CASE FLYER, BANKING & FINANCIAL SERVICES
ET Cases, 4 pages

Case Preview

CASA Takes a Dip

 

Expected Learning Outcomes

• Understand the importance of CASA ratio from the point of view of a bank's profitability
• Analyze the reasons behind the declining CASA ratios and CASA market shares of Indian PSU banks
• Discuss and debate on the steps that can be taken to increase Indian PSU banks' CASA ratios and CASA market shares

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I. CASA Deposits’ Ratio and Banks’ Profitability

1. What do you understand by CASA ratio and what is its importance to a bank’s profitability?
2. How do you calculate CASA ratio?
3. How are CASA ratio, cost of deposits and Net Interest Margin (NIM) related?
4. What does CASA mean for customers?
5. ............................

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Teaching Note Preview

CASA Takes a Dip

 

Synopsis

With increasing competition in Indian banking industry (with 2 universal bank licences, 11 Payment Bank licences and 10 small bank licences granted by the RBI), the intensity to access the pool of deposits has been quite intriguing. As CASA deposits form a sizeable portion of total deposits, many banks have intensified their efforts to increase their market shares. However, during the last few years public sector banks had been losing their market share to private sector banks in CASA deposits. This case flyer, based on the accompanying article1, can be used to analyze the reasons for the same.

Case Positioning and Setting

This case flyer can be used in MBA Programs – Retail Banking course to understand the concept of CASA deposits, the importance of CASA deposits for a bank and the reasons for the decreasing CASA market share of PSU banks.

Preamble to the Case Flyer Analysis

This case flyer’s analysis and discussion can be highly useful in understanding the concept, connotations and the importance of CASA deposits from the standpoint of a bank’s profitability. While its importance need not be overemphasized, it is important for the students/participants, especially those pursuing banking courses or planning to pursue a banking career, to be sensitized to the implications of CASA deposits. This sensitization would go a long way in getting the deposits mobilization strategies right. The discussion on the case flyer was conducted under two broad topics [Exhibit (TN)-I]...............

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Abstract


This case flyer and the base article ("CASA takes a Dip" by Sangita Mehta in The Economic Times, August 26th 2015) are meant to sensitize the students/participants to the concept and importance of Current Accounts and Savings Accounts (CASA) deposits in any banks’ profitability/operations. CASA ratio is an important element in addressing a bank's profitability. Higher the CASA ratio vis-à-vis the total deposits of a bank, the higher the amount available at lower cost of servicing. While current accounts and savings accounts have different objectives, the banks stand to benefit from the low cost of servicing these deposits. However, of late, the Public Sector Undertaking (PSU) banks' share of CASA has been declining adding to their NPA woes. Why are PSU banks CASA ratios and market shares plummeting? What impact
would it have on their profitability? What can be done to increase PSU banks' CASA ratios and market shares?



Pedagogical Objectives

  • To understand the importance of CASA ratio from the point of view of a bank’s profitability
  • To analyze the reasons behind the declining CASA ratios and CASA market shares of Indian PSU banks
  • To discuss and debate on the steps that can be taken to increase Indian PSU banks' CASA ratios and CASA market shares

Case Positioning and Setting
This case flyer can be used in MBA Programs - Retail Banking course to understand the concept of CASA deposits, the importance of CASA deposits for a bank and the reasons for the decreasing CASA market share of PSU banks




This Case Pack Includes:
- Abstract
- Case Flyer
- Teaching Plan (**ONLY for Academicians)
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