Tuesday, October 25, 2011

Savings Account Deregulation: Banks with high CASA Ratio to be impacted most

RBI in its monetary policy on 25th Oct 2011 deregulated the Savings Bank Account Interest rate with immediate effect. Till 24th Oct 2011 the interest rate on Saving Account was fixed at 4%.

The deregulation could have significant impact on banking industry and particularly the banks with high Current Account Saving Account (CASA) ratio , as the cost of funds are bound to go up because of rise in interest rates on Savings Account.

Smaller banks with lower CASA ratio will try to mop up deposits by offering higher rates on Savings Account to customers as a result of which the larger banks will also follow the suit to keep their customers intact. Due to large number of public and private sector banks, the deregulation and competition is expected to increase the Savings account rate significantly from the current levels of 4%.

InvestorZclub tried to list the banks which could be impacted the most, both in terms of profitability and stock price.

Bank                     CASA Ratio               CMP                52 week High / Low
HDFC Bank         50%                           468                    519 / 396

SBI                        47.5%                        1840                 3515 / 1708

ICICI Bank          42%                           877                    1277 / 762

Axis Bank             42%                           1119                  1585 / 946

PNB                       40%                           928                   1395 / 872

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