The CASA ratio is the proportion of deposits in current and savings accounts to overall deposits in a bank.
A higher CASA ratio indicates that a bank has more cheap cash.
This is because a bank’s interest rate on savings account deposits is smaller than the rate on other types of deposits.
Furthermore, the most of current accounts do not pay interest to account holders.
The bank will lend out more loans at a cheaper rate if it has more cheap money on hand.
A bank may have to rely on a more expensive source of funds if the CASA ratio is poor.
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