The share of low-cost Current Account and Savings Account (CASA) deposits in India’s banking system has declined to a two-year low, highlighting growing pressure on deposit mobilisation. According to data from the Reserve Bank of India, the CASA ratio stood at 37.9% in the December 2025 quarter, down from 40.1% in December 2023 and 38.3% a year ago.
The decline has been primarily driven by a fall in savings account deposits, whose share dropped by 210 basis points to 28.9%. This trend reflects a shift in depositor preference towards higher-return investment avenues such as equities, mutual funds, and gold.
Deposit Growth Slows Slightly:
Overall bank deposits grew by 10% year-on-year to ₹239.8 lakh crore by the end of December 2025. However, this growth was slightly lower compared to 11% growth recorded in the same period last year, indicating a broader slowdown in deposit mobilisation.
- Savings account balances increased by 8% YoY to ₹69.4 lakh crore, improving from 5% growth a year earlier.
- Current account deposits rose 10% to ₹21.4 lakh crore, compared to 9% growth in December 2024.
Shift Towards Costlier Funding Sources:
The decline in CASA deposits is a concern for banks because these deposits are low-cost and stable. As their share reduces, banks are increasingly forced to rely on higher-cost funding sources, including:
- Term deposits
- Certificates of Deposit (CDs)
- Bulk borrowings
In fact, CD issuances reached a record ₹15.5 lakh crore in FY26, registering a 17% year-on-year increase, as banks turned to market borrowings to support credit demand.
Impact on Profitability:
The erosion in CASA deposits leads to a rise in banks’ overall cost of funds, which directly impacts profitability. Higher funding costs tend to compress Net Interest Margins (NIMs), reducing the earnings potential of banks.
CASA deposits are typically more stable and less sensitive to interest rate changes, making them crucial during periods of liquidity stress or strong credit growth.
Rising Credit-Deposit Ratio:
With deposit growth lagging behind credit expansion, the Credit-Deposit (CD) ratio has been rising steadily.
- CD ratio increased to an all-time high of 83.0%, up from 82.4% earlier
- Total bank credit reached ₹207.7 lakh crore (13.5% YoY growth) as of March 15, 2026
- Aggregate deposits stood at ₹250.1 lakh crore (10.8% growth)
The rise in CD ratio indicates tighter liquidity conditions, partly due to seasonal factors such as tax outflows.
Outlook:
Bankers expect some improvement in the CASA ratio in the current financial year. Factors such as geopolitical uncertainty and volatile equity markets may encourage investors to shift funds back into safer bank deposits.
Conclusion:
The fall in CASA ratio signals a structural shift in savings behavior and poses challenges for banks in maintaining low-cost funding. Sustained pressure on deposits, coupled with rising credit demand, could continue to impact liquidity, funding costs, and profitability in the near term.