Public sector banks in the country have noted a slide in their current and savings account (CASA) deposits during the ongoing fiscal. A drop in bank's CASA deposits means that is has to pay an increased cost in the form of higher interest given on their primary deposits.
India's largest lender, State Bank of India (SBI) saw a dip in its CASA deposits from 43.1% in March 2008 to 39.7%.
Even Punjab National Bank's CASA deposits of liability dropped to 39% from 43% during this period. A senior official from PNB said that an increase in the high cost deposits becomes a worrying factor as it reduces the profit margin of the banks. "It is more so now as the banking industry is faced with a tough challenge in the wake of the collapse of the global financial sector," he said.
In fact smaller players of the public sector banking industry like Punjab and Sind Bank, Corporation Bank, Vijaya Bank and Dena Bank are affected more by the meltdown. The CASA deposits of Punjab and Sind Bank has declined from 36.34% in March 2008 to 31.35%. Similarly Corporation Bank also noted a declining CASA deposits from 35% in March 2008 to 25.44% in September.
The official added that stronger players are somehow able to manage this fall but it has been hard for the smaller ones to make their stand. In PSU banks CASA deposits, "there has been a very meager dip from what it was in March," the official said.
The finance ministry has been constantly emphasizing on the need for banks to focus on their CASA deposits. Earlier in August banks were urged by the finance minister to increase their current account, savings account (CASA) deposits to 40% of the total deposits.