Lower CASA ratios, decline in FDs pose deposit stability challenges for banks: Crisil
Rating agency Crisil in its latest report has said that a ‘structural shift’ in deposit composition due to a decline in fixed deposits (FDs) and lower share of current and savings accounts (CASA) balances poses challenges to banks over the medium to long term. This comes amid concerns in some quarters over the increased preference for capital market investments by households looking for higher yields, while others believe the shift is representative of the maturing profile of the system.
The report said two key trends, a decline in household contribution to term deposits and a lower Casa ratio, indicate a structural shift in deposit composition. And these may pose challenges to deposit stability and impact funding costs over the medium to long term, particularly during periods of tight liquidity. It said housheholds accounted for 60 per cent of the deposit base in March 2025 as against 64 per cent in March 2020, and added that besides growth in deposits, composition of the base is also very important for banks because it influences the stability and costs.
The agency also expects a further decline in household contributions going ahead. It said similarly, the low-cost Casa deposits have been on a declining trajectory, with the ratio falling to 36 per cent in June 2025 from a 25-year high of 42 per cent in March 2022. It is the savings deposits which has suffered and current account balances have been range bound. It added that the recent reductions in savings interest rates by banks will only exacerbate this trend.
