Private banks pip PSBs in Casa mobilisation

The share of low-cost current CASA deposits has improved for most private lenders

At a time when lenders are focusing on reducing costs to improve earnings, it appears private sector banks are faring better than their state-run rivals. In 2013, while the share of low-cost current account and savings account (Casa) deposits improved in the case of most private lenders, many government banks reported a decline.

At the end of December, State Bank of India (SBI),  the largest lender, saw Casa deposits rise 12.5 per cent compared to a year earlier. During the same period, these of ICICI Bank and Axis Bank increased 17 per cent and 14 per cent, respectively.

While the Casa ratios of public sector banks such as SBI, Bank of India, Canara Bank and Union Bank of India declined compared to the year-ago period, the ratio improved for private banks such as ICICI Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and YES Bank.

“Within deposits, the growth in Casa continues to be respectable. The momentum, somewhat compromised in the tight-interest-rate period, has again picked up and, hopefully, has more to go,” Rajat Monga, senior group president (financial markets) and chief financial officer, YES Bank, had said during the announcement of its earnings for the third quarter. At the end of the December quarter, the bank’s savings deposits increased 55 per cent, while its Casa book expanded 38 per cent compared to a year earlier.

Analysts feel attractive pricing, better customer service and branding of Casa products have helped private banks gain a good share of the low-cost deposit market. “A few drivers have resulted in private sector banks gaining market share in Casa, at the cost of public sector banks. While attractive pricing has been a differentiator, better customer relationship management and customer-retention focus has also resulted in attracting Casa deposits,” said Monish Shah, senior director at Deloitte in India.

He added most private companies preferred to have employee salary accounts at private banks, primarily due to better service. This has helped private lenders strengthen their low-cost deposit base. “Also, private banks have done better branding of their Casa products, along with leveraging alternate channels such as their ATM (automated teller machine) network to generate leads. Customers have demonstrated a preference for better-priced Casa products, as well as better service levels.”

Casa deposits are considered low-cost, as banks do not pay interest on current account deposits, while savings account deposit rates are below retail term deposit and wholesale deposit rates. Most banks pay only four per cent interest on savings deposits; only a few private lenders—-Kotak Mahindra Bank, IndusInd Bank, YES Bank and RBL Bank (formerly Ratnakar Bank) —-offer higher rates on these deposits.

 

The pricing certainly appears to play a role in mobilisation of CASA deposits with IndusInd Bank now adding 55,000-60,000 customer accounts every month.