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Question

In Banking Industry, what is true about CASA.

i.It stands for Current Account and Saving Account

ii.CASA represents the low-cost funds available to the bank

iii.Banks pay zero interest on the balances on Current Accounts

A Only i Correct Answer Incorrect Answer
B Only i & ii Correct Answer Incorrect Answer
C Only ii & iii Correct Answer Incorrect Answer
D Only iii Correct Answer Incorrect Answer
E All the above Correct Answer Incorrect Answer

Solution

CASA ratio of a bank is the ratio of deposits in Current Account (CA) and Saving Accounts (SA) to total deposits. A higher CASA ratio indicates a lower cost of funds, because banks do not usually give any interests on current account deposits and the interest on saving accounts is usually very low 3-4%. Only few banks (e.g. YES Bank and Kotak Mahindra Bank) pay higher interest of around 6% on Saving Account balance.

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