Parliamentary panel raises concern over dip in CASA ratio for banks

The Standing Committee on Finance in its report tabled on Wednesday suggested that banks should diversify funding sources, optimise operations and leverage artificial intelligence (AI)-driven automation to enhance efficiency, reduce costs and drive digital banking innovations in response to the decline in current account savings account (CASA) deposit ratio.

 

“The committee understands that the decline in financial savings presents a liquidity challenge for banks, limiting access to low-cost funds. The committee opines that the adoption of advanced technologies, including AI and machine learning, will not only improve operational efficiency but also enhance competitiveness and customer engagement,” the standing committee said in its report on reviewing the demands for grants of the Department of Financial Services for the financial year 2025

(FY25).

 

The standing committee also emphasised that by fostering a secure banking ecosystem and prioritising technological advancements, banks can position themselves as forward looking institutions that balance security with innovation.

 

“The committee thus urges for proactive addressing of liquidity concerns, enhancing customer attraction especially in underserved areas and leveraging technology for operational efficiency so that banks can mitigate the impact of declining CASA ratios and maintain their role as stable and reliable financial institutions in the future,” said the report.

 

Grievance redressal

 

The Standing Committee on Finance also emphasised the need for a comprehensive review and strengthening of grievance redressal mechanisms within the banking and insurance sectors.

 

In its latest report, the committee suggests that studying global best practices could provide valuable insights to improve the current system. It recommends regular awareness campaigns to inform customers about the available redressal options and urges the implementation of proper training for personnel handling complaints.

 

The committee said that enhancing staff training will help resolve grievances more efficiently, reduce the categorisation of complaints as “non-entertainable,” and ultimately improve consumer satisfaction.

 

The committee noted that given the rising number of grievances/complaints filed concerning banking and insurance sectors, the issue of adherence to the prescribed time limit for resolution and decisions being binding and enforceable are vital and essential for effective redressal of grievances.

 

The panel observed that as per Annual Report (2023-24) of Council for Insurance 36 Ombudsman, all 17 Insurance Ombudsman Centres received a total 52,575 complaints and disposed of 49,705 complaints out of which 12,855 were treated as non-entertainable.

 

The number of complaints received under RBI’s ombudsman scheme increased at a compounded average growth rate of almost 50 per cent per year over the last two years to 9,34,000.

 

FDI in insurance

 

Moreover, the panel has called for a careful and thorough approach to address the challenges posed by foreign direct investment (FDI) in India’s insurance sector.

 

In its report, the committee also highlighted the transformative potential of InsurTech, noting that advanced technologies like AI, big data analytics, and blockchain could significantly enhance efficiency, customer experience, and risk assessment. The committee emphasised that wider adoption of digital platforms in the insurance sector could help insurers reach underserved rural and semi-urban markets, thereby promoting inclusive growth and strengthening India’s insurance ecosystem.