HDFC Bank CASA Ratio: History and What It Means

The CASA ratio is the share of a bank’s deposits that sit in current accounts and savings accounts, the low-cost or no-cost money that funds lending cheaply. HDFC Bank was known for years as one of the strongest deposit franchises among large Indian private banks, with a CASA ratio broadly in the low-to-mid 40s percent range, before the metric eased to roughly the high-30s after its 2023 merger with parent HDFC Ltd.

That trajectory, a long stretch of a high CASA ratio followed by a step-down and a stated push to rebuild it, is the story worth understanding. It explains a lot about how the bank funds itself, why funding cost matters, and what to watch alongside the headline number.

What CASA actually measures

CASA is an acronym: current account and savings account. Both are deposit types that customers can draw on at short notice.

• Current accounts are typically used by businesses for daily transactions. In India they usually pay no interest at all.
• Savings accounts pay a modest rate, historically low relative to term deposits.
• Term (fixed) deposits, by contrast, lock money up for a fixed period and pay a higher rate.

The CASA ratio is simply CASA deposits divided by total deposits, expressed as a percent. If a bank has a CASA ratio of 40 percent, then 40 paise of every rupee of deposits comes from these cheap accounts, and the remaining 60 paise comes from costlier term deposits and other funding.

Why does this matter so much? Because a bank earns its living on the spread between what it charges borrowers and what it pays depositors. Cheap deposits widen that spread. A higher CASA ratio pulls down the average cost of funds, which in turn supports the net interest margin, or NIM, the core profitability measure for a lender. Two banks can lend at the same rate, but the one with the higher CASA ratio keeps more of the difference.

Why HDFC Bank was a CASA standout

For much of its history as a standalone bank, HDFC Bank was regarded as having one of the best deposit franchises in the Indian private sector. Its CASA ratio sat broadly in the low-to-mid 40s percent range across many years (an approximate band, and one that moved around with the deposit cycle).

A few things drove that strength:

• A large, sticky base of salary and current accounts built up over decades of branch and corporate relationships.
• A reputation for reliability that made it a default banking home for many retail and business customers.
• Steady branch expansion that brought in low-cost deposits across geographies.

A high CASA ratio was, in effect, part of the bank’s identity. It signalled that a big chunk of its funding was cheap and stable, which underpinned consistent margins.

It is worth stating plainly that CASA ratios are cyclical. When interest rates rise, savers tend to shift money out of low-yielding savings accounts and into term deposits chasing higher rates, which pushes CASA ratios down across the industry. When rates fall, the reverse happens. So even before any merger, the exact number moved period to period. The point is the level: HDFC Bank generally ran well above many peers.

The 2023 merger and the step-down

In 2023, HDFC Bank merged with its parent, HDFC Ltd, a large housing finance company. This was one of the biggest corporate combinations in Indian financial history, and it changed the shape of the bank’s balance sheet.

Here is the crux. HDFC Ltd was a housing finance company, not a bank. It could not take deposits the way a bank does. Instead, it funded its mortgage book largely through borrowings: bonds, debentures, and other market and bank funding. That funding was more expensive than low-cost CASA deposits, and it carried none of the current or savings balances that lift a CASA ratio.

When the two entities combined, the merged balance sheet absorbed HDFC Ltd’s large borrowing-heavy liabilities. The numerator of the CASA ratio (current and savings deposits) did not jump, but the denominator and the overall funding base grew to include a big slug of borrowings. The arithmetic result was dilution: the combined entity’s CASA ratio stepped down from the bank’s historical low-40s territory into roughly the high-30s percent range (again, approximate, and as of periods around and after the merger).

The table below sketches the before-and-after picture in clearly approximate terms. It is illustrative, not a precise year-by-year record.

Aspect	Approx. pre-merger (standalone bank)	Approx. post-merger (combined entity)
CASA ratio	Low-to-mid 40s percent	High-30s percent
Funding mix	Deposit-led, high share of low-cost CASA	Deposits plus a large slug of inherited borrowings
Nature of added book	n/a	Housing finance funded largely by borrowings
Stated priority	Grow deposits	Rebuild low-cost deposits, replace borrowings over time

The direction of the change is well established; treat the specific figures as rounded approximations.

Why deposit mobilisation became the priority

After the merger, growing low-cost deposits became a repeatedly stated priority for the bank. The logic follows directly from the CASA arithmetic.

The merged entity inherited a stock of relatively expensive borrowings from the housing finance book. Over time, as those borrowings mature, the bank’s aim has been to replace that funding with deposits, ideally low-cost CASA deposits rather than only higher-cost term deposits. Doing so would gradually lower the blended cost of funds and, all else equal, support margins.

That is why so much attention landed on deposit growth in the quarters after the merger. The questions analysts and observers focused on were straightforward:

• Is the bank growing total deposits fast enough to fund its loan book without leaning on costly borrowings?
• Within that, is it growing CASA deposits, or mostly term deposits?
• How is the cost of deposits, and therefore NIM, trending as the mix shifts?

Rebuilding a CASA ratio is a slow process. Low-cost balances are won account by account, relationship by relationship, and the broader rate environment either helps or hurts along the way. There is no quick lever.

How CASA sits alongside NIM and deposit growth

The CASA ratio is most useful read in context, not in isolation.

• CASA and NIM move together, loosely. A higher CASA ratio lowers funding cost, which supports NIM. But NIM also depends on loan yields, asset mix, and the rate cycle, so a change in CASA is one input, not the whole story.
• CASA and deposit growth interact. A bank can grow deposits fast while its CASA ratio slips, if most of the new money arrives as term deposits. Growth and mix are two different questions. Watching only the ratio, or only the growth number, can mislead.
• The rate cycle colours everything. In a high-rate environment, CASA ratios across the industry tend to compress as savers chase term-deposit yields. A falling CASA ratio in such a period is partly a sector story, not solely a company story.

For HDFC Bank specifically, the post-merger frame is: a franchise with a genuinely strong deposit history, now working to lift a merger-diluted CASA ratio back up while it grows deposits and manages down inherited borrowings. Whether the ratio drifts up, holds, or dips in any given quarter depends on both the bank’s own deposit-gathering and the rate cycle it operates in.

How to read CASA: a takeaway

A few plain principles for reading any bank’s CASA ratio, HDFC Bank included:

• Think of it as a funding-cost gauge. Higher CASA means cheaper, stickier funding. That is the reason the number gets attention.
• Read the level and the trend together. A high ratio that is drifting down and a lower ratio that is climbing tell different stories. Direction matters as much as the snapshot.
• Adjust for the rate cycle. Industry-wide CASA compression in a high-rate period is different from a company losing share of low-cost deposits.
• Pair it with NIM and deposit growth. CASA is one lever on margin, and deposit growth tells you whether the funding base is keeping up with lending. No single figure captures a deposit franchise on its own.
• Treat merger effects as structural, not cyclical. HDFC Bank’s step-down from the low-40s to the high-30s came from absorbing a borrowing-funded housing book, not from a bad quarter. Rebuilding it is a multi-year effort.

Read this way, the CASA ratio stops being a single percent and becomes a lens on how a bank funds itself, and how much that funding costs.

This article is for information and education only. Altys Labs is not a SEBI-registered research analyst or investment adviser, and nothing here is a recommendation to buy, sell, or hold any security. Figures are approximate and as of recent periods; verify current data before relying on it.