Economics • Banking & FinanceEasy
What does the term 'CASA Ratio' represent for a commercial bank?
A. The ratio of current account and savings account deposits to total deposits.✓ Correct Answer
B. The proportion of core capital to risk-weighted assets.
C. The share of credit allocated to the agricultural sector.
D. The proportion of non-performing assets written off in a financial year.
💡 Solution & Explanation
The Current Account Savings Account ratio measures the proportion of a bank's total deposits originating from current and savings accounts, which typically offer very low or zero interest rates to depositors. A higher CASA ratio indicates a cheaper source of funding for banks, thereby improving their net interest margins and overall profitability.
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