Select mid-sized private banks demonstrated superior performance in mobilising low-cost deposits during the June quarter, with IDFC First Bank, Bandhan Bank and Federal Bank reporting significant year-on-year improvements in their current and savings account (Casa) ratios. According to reports from The Economic Times, these banks outperformed their larger rivals in this crucial metric during the quarter.
IDFC First Bank posted the strongest improvement with its Casa ratio rising 280 basis points year-on-year to 50.8% in the June quarter from 48% a year earlier. As reported by The Economic Times, V Vaidyanathan, MD and CEO, explained that the bank's Casa was initially only 10% and the management focused on building the ratio to 50% over the first three to four years of taking over management. The CEO emphasized their strategy of slowing down loan book growth to address structural issues, stating they believe in playing the long game in every format.
Bandhan Bank's Casa ratio improved 234 basis points to 29.4%, while Federal Bank's rose 188 bps to 32.23%, according to their investor presentations reported by The Economic Times. Federal Bank's MD and CEO KVS Manian highlighted their consistent growth strategy, stating they are opening double the current accounts compared to a year ago and focusing on higher variant savings accounts for better quality deposits. These improvements demonstrate the strategic focus these banks have placed on building low-cost deposit bases to support their future growth and operational efficiency.
In contrast to the mid-tier banks' success, the four largest private sector banks reported declining Casa ratios during the quarter. HDFC Bank's ratio fell 160 bps to 32.3%, while Axis Bank's month-end Casa ratio declined about 200 bps to 38%. Kotak Mahindra Bank reported a 60 bps decline to 40.3%, and ICICI Bank's quarterly average Casa ratio moderated 60 bps to 38.1%. As per The Economic Times, this quarterly performance comes against a broader five-year erosion in low-cost deposit ratios across the banking industry, with Kotak Mahindra Bank recording the steepest decline of 1,780 bps to 40.3% between FY23 and FY27.
Forbright Bank has achieved remarkable success in digital deposit gathering, crossing 100,000 accounts on their proprietary digital banking platform with approximately 90% of deposits FDIC insured. As reported by Investing.com, the bank's digital deposits grew 9% from Q1, allowing them to decrease higher-cost funding and improve their cost of funds. The bank successfully launched their digital deposit promotion capability on June 15th, which is performing meaningfully better than projected and is expected to position them with significantly more deposits than planned by the end of Q3.
