Synopsis

"Our Casa was only 10% initially. For the first three or four years of taking over management of this bank, we slowed down the loan book and focused on building the Casa ratio to 50%," V Vaidyanathan, MD and CEO, IDFC First Bank, told ET in an interview. "If we had kept growing the loan book, we could never have addressed structural issues like this. I believe in playing the long game in every format."

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MUMBAI: Select mid-sized private banks outperformed their larger rivals in mobilising low-cost deposits during the June quarter, with IDFC First Bank, Bandhan Bank and Federal Bank reporting a sharp year-on-year improvement in their current and savings account (Casa) ratios. IDFC First Bank posted the strongest improvement, with its Casa ratio rising 280 basis points year-on-year to 50.8% in the June quarter from 48% a year earlier.

"Our Casa was only 10% initially. For the first three or four years of taking over management of this bank, we slowed down the loan book and focused on building the Casa ratio to 50%," V Vaidyanathan, MD and CEO, IDFC First Bank, told ET in an interview. "If we had kept growing the loan book, we could never have addressed structural issues like this. I believe in playing the long game in every format."

Bandhan Bank's Casa ratio improved 234 basis points (bps) to 29.4%, while Federal Bank's rose 188 bps to 32.23%, according to their investor presentations.

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"We have been consistently growing our CA and SA both at a good pace," said KVS Manian, MD and CEO, Federal Bank. "We are opening double the current accounts that we were opening a year back. We are opening more higher variant savings accounts, so better quality accounts are coming in. Our branches' KPIs have significantly changed in favour of liability side over the asset side."

In contrast, the four largest private sector banks reported a decline in Casa ratios. HDFC Bank's ratio fell 160 bps to 32.3%, while Axis Bank's month-end Casa ratio declined about 200 bps to 38%. Kotak Mahindra Bank reported a 60 bps decline to 40.3%, while ICICI Bank's quarterly average Casa ratio moderated 60 bps to 38.1%.

The quarterly performance, however, comes against a broader five-year erosion in low-cost deposit ratios across the banking industry.

Between the June quarters of FY23 and FY27, Kotak Mahindra Bank recorded the steepest decline, with its Casa ratio falling 1,780 bps to 40.3% from 58.1%. HDFC Bank's ratio declined 1,350 bps to 32.3% from 45.8%, although the comparison is partly skewed by its merger with HDFC , which added a relatively term deposit-heavy liability base.

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IndusInd Bank's Casa ratio fell nearly 1,380 bps to 29.4% from 43.2% over the period. Bandhan Bank reported a similar decline to 29.4% from 43.2%. ICICI Bank's quarterly average Casa ratio fell 770 bps to 38.1%, Axis Bank's month-end ratio declined about 600 basis points to 38%, and Federal Bank's ratio fell 461 bps to 32.23%.

IDFC First Bank and YES Bank were the only lenders among the 10 banks analysed to improve their Casa ratios over the five-year period. IDFC First Bank's ratio rose 80 bps to 50.8% from 50%, while YES Bank's increased 110 bps to 32.7% from 31.6%.