Ever heard of CASA? Well, in the finance world, CASA is a term you would hear often when talking about banks. Banks use these CASA accounts to hold customers’ money and that’s why every person must be aware of CASA, its features, benefits, and how it works. The more you understand, the better it is for you to see how banks manage your money.
So, let’s move ahead and learn what is CASA account in banking, the CASA features and benefits, how it differs from other accounts, what the CASA ratio is, how to calculate it, and why it matters to banks.
What is CASA?
CASA full form in banking is Current Account Savings Account. These are unique accounts where people and businesses keep their money. CASA accounts combine the benefits of savings accounts and current accounts. A current account is mostly used by businesses for everyday transactions and it allows them to deposit and withdraw money often. On the other hand, a savings account is for individuals to save money and earn a small amount of interest.
Features of CASA
There are several CASA features you should be aware of:
- Low interest rates
- Provides easy access to money
- Allows many transactions
- Requires a minimum balance
Benefits of CASA
Now, let’s talk about the CASA benefits you can avail:
- You can easily access your money for daily expenses
- The bank pays interest on CASA account deposits
- These accounts help businesses handle lots of transactions easily
- You can use services like online banking, debit cards, and cheques
Difference between Current and Savings Accounts
The difference between a current and savings account is pretty simple. Current accounts are for businesses. They do not earn interest and often need a higher minimum balance. Now, on the contrary, savings accounts are for individuals to save money and earn interest. They have lower minimum balance requirements and a limited number of transactions each month.
CASA Ratio
The CASA ratio actually shows how much of a bank’s total deposits come from current and savings accounts. Hence, it is quite an important number for banks.
Calculation of CASA Ratio Formula
To calculate the CASA ratio, the following simple formula is used:
CASA Ratio = (CASA Deposits/Total Deposits)×100
Now, let’s understand it with an example:
For example, if a bank has ₹10 crores in total deposits and ₹5 crores in CASA deposits, then the CASA ratio would be:
CASA Ratio = (5/10)×100 = 50%
Importance of CASA for Banks
CASA deposits are cheaper for banks because they pay less interest on these accounts. If the CASA ratio is high, then it means the bank makes more profit since it saves on interest costs. Banks can easily use CASA deposits to meet daily transaction needs. Also, CASA accounts provide a steady flow of money and help the bank stay financially healthy.
Conclusion
CASA accounts are important for both customers and banks. They give customers easy access to their money and basic banking services. For banks, these accounts offer low-cost deposits that help them lend money and invest.
Now, if you are looking for an instant personal loan to help you with urgent funds, then download the CASHe loan app now. With the help of the app, you can avail quick loans.
FAQs
1. What does CASA stand for?
CASA full form in banking is Current Account Savings Account.
2. How is the CASA ratio calculated?What details are required to check my personal loan application status?
The CASA ratio is calculated by dividing the total deposits in current and savings accounts by the bank’s total deposits and multiplying by 100.
3 Why is the CASA ratio important for banks?
The CASA ratio is important because it shows the bank’s cost of funds and profit potential.
4. What is the difference between a current account and a savings account in CASA?
A current account is used for frequent transactions by businesses, while a savings account is for individual savings.
5. How do banks benefit from high CASA ratios?
Banks benefit from high CASA ratios by getting low-cost funds, which increases their profit and liquidity.
