CASA Deposits of Private Banks Growing Faster than the Public Banks

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PSU banks lag private peers in CASA growth

The gap in the current account and savings account (CASA) growth rate between state-owned and private sector banks (PSBs) has widened in 2014-15. Although CASA deposits of private banks have been growing faster than the public banks, the difference in the last fiscal was most striking. 

CASA deposits of Bank of Baroda, Punjab National Bank and State Bank of India grew below 11%, while growth rate in such deposits of HDFC Bank, ICICI Bank and Kotak Mahindra Bank was more than 15%. 

CASA is a source of low-cost funds for the banks. In the case of Kotak and Yes Bank, higher rates on savings deposits contributed to a significant CASA growth (see table). 

The trend may continue this year as well, with public sector banks focussing more on containing increase in stressed loans than on business growth. Weak CASA growth along with high-stressed assets has resulted in the valuation gap between the public and private sector banks. 

Barring SBI, stocks of all public sector banks are trading at a price-to-book value (P/BV) of less than one while most private sector banks are trading at a P/BV of over two.