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| Government tells four banks to increase Casa deposits |
| Abhijit Lele / Mumbai Aug 24, 2010, 00:54 IST |
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IDBI, UCO Bank, OBC and Vijaya Bank get the directive.
UCO Bank and Oriental Bank of Commerce (OBC) are working on implementing a plan to increase their low-cost deposits, commonly known as the current account savings account, or Casa.
The move follows a directive by the government to these banks, along with IDBI Bank and Vijaya Bank, to lift their Casa to more than 30 per cent of the total deposits, as it has a direct bearing on their profitability and net interest margins.
The share of low cost deposits of the public sector banks was below 25 per cent as at end of March this year. IDBI Bank with 14.59 per cent, Oriental Bank of Commerce with 24.97 per cent; UCO Bank with 23.56 per cent and Vijaya Bank with 24.6 per cent, were below the government’s comfort level.
“In order to improve their profitability, these banks must aim for a Casa of 30 per cent or more,” according to finance ministry communication to banks.
UCO Bank planned to increase its automatic teller machines (ATMs) to 1,000 from 400 at present to boost the average amounts kept in savings accounts, Executive Director Ajay Kumar said in an interview.
While the growth in the savings banks had been significant, the pace in the case of current accounts had lagged behind, he said.
Kumar said he was pushing the use of electronic payment facilities like Real Time Gross Settlement (RTGS) and mobile banking. It would be useful for small and medium size enterprises to operate current accounts. These specific steps should help to perform on Casa front. The bank had targeted to grow share of low cost deposits to 30 per cent by the end of March 2011, he added.
The Kolkata-based UCO Bank has also selected 231 personal finance branches in densely populated residential areas across the country to do close follow-ups. It expects to make a dent in garnering more saving deposits.
OBC was aggressively pushing to garner low cost deposits, T Y Prabhu, chairman and managing director said in an interview.
OBC aimed to increase the share of low cost deposits to the 30 per cent mark in next two-three years, he said. It would be challenging to maintain margins at a time when banks are beginning to pay more for raising deposits, he added.
Three banks – UCO, Vijaya and OBC – have an extensive branch network to ramp up share of Casa in near term.
But, IDBI Bank would find it very tough to almost double the share of low cost deposit to 30 per cent in medium term. This bank, an erstwhile development finance institution, was converted into a commercial banking entity just few years ago. It has limited branch-base and client base.
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