CASA ratio is the ratio of the deposits in the form of Current Account & Savings Account to the total deposits.. it should be higher for a bank because interest paid on savings account is very low and no interest is paid on current account deposits. In this way, the banks get money at low cost..
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How is CASA different from term and demand deposits?
Current and saving accounts remain operational. Depositors don't need to give prior notice to withdraw money, however, in case of term deposits, the money is locked in for a specific period. If a depositor wishes to withdraw the money before maturity, he may have to pay a fine. Usually, an overdraft facility is available with the current account deposit. Demand deposit gives you the facility to withdraw your money anytime.
Current and saving accounts remain operational. Depositors don't need to give prior notice to withdraw money, however, in case of term deposits, the money is locked in for a specific period. If a depositor wishes to withdraw the money before maturity, he may have to pay a fine. Usually, an overdraft facility is available with the current account deposit. Demand deposit gives you the facility to withdraw your money anytime.
How is it important for banks?
