Falling CASA ratio, lower household deposits may hit stability: CRISIL

CRISIL warns that declining household deposits and a falling CASA ratio could impact funding stability and raise costs for banks over the medium to long term

Rating agency CRISIL on Friday said structural shifts in deposit composition—declining household contribution to term deposits and a lower current account and savings account (CASA) ratio—could affect banking stability and raise funding costs over the medium to long term.

 

However, deposit growth at banks is expected to remain adequate in FY26 amid an improved liquidity environment, supporting projected credit growth of 11–12 per cent, the rating agency said in a statement.

 

Beyond overall growth, the composition of deposits plays a critical role in determining their stability, cost and the sustainability of bank credit growth. Notably, the ownership pattern of deposits is undergoing a structural shift, with household deposits contracting in share.

 

CRISIL observed that households are allocating less of their gross financial savings to bank deposits, migrating instead to alternative investment avenues. Consequently, the share of households in incremental deposits fell to 52 per cent in FY25 from 67 per cent in FY20. 

 

“On an outstanding basis, the share of household deposits in total bank deposits contracted from 64 per cent to 60 per cent between fiscals 2020 and 2025, with non-financial corporations filling the gap with a four per cent increase,” said Subha Sri Narayanan, director, CRISIL Ratings. This shift has implications for stability and costs, as corporate depositors are more rate-sensitive and prefer shorter tenures.

 

During periods of tight liquidity, such behaviour could lead to faster deposit outflows and increased funding costs for some banks. Looking ahead, as alternative investments continue to gain traction, the household share of deposits is expected to decline further, Narayanan added.

 

The share of low-cost CASA deposits, across ownership categories, has also been falling. The CASA ratio dropped to around 36 per cent in June 2025, down from a 25-year high of over 42 per cent in March 2022. The ratio had surged after demonetisation and again between 2019 and 2022 during the Covid-19 pandemic, CRISIL noted.