A synopsis on

The impact of CASA accounts on the NIM of public and private sector banks

Submitted by SREEKANTH AP Reg NO. 11MB7795

 Title of the study The effect of CASA accounts in the net income margin (NIM) of public and private sector banks Introduction Higher net interest margins, or NIM, - a key financial parameter that analysts track to judge the health of lenders -A performance metric that examines how successful a firm's investment decisions are compared to its debt situations. Indeed, CASA plays an important role in lowering the cost of deposits. The CA of CASA, or current account, is primarily meant for companies, public enterprises and entrepreneurs who have numerous banking transactions daily. Such accounts are cheque-operated and a customer can deposit or withdraw any amount of money any number of times. Banks generally insist on a higher minimum balance to be maintained in a current account and as it involves many transactions and the balances maintained in the account are too volatile, banks generally levy certain service charges for operating a CA. The money kept in such an account comes free to a bank as no interest is paid on current accounts. A savings account, or the SA of CASA, is the most common operating account for individuals and others for non-commercial transactions. Banks generally put a ceiling

on the total number of withdrawals permitted and stipulate a certain minimum balance to be maintained in such accounts. The savings account rate is currently pegged at 3.5%, but the average cost of banks is around 2.8% as banks pay interest only on the minimum balance kept between the 10th and the end of a month. So the impact of CASA accounts in the net interest margin of different banks in public as well as private sector is an important topic to be discussed. Objectives ( Expected results from the Project) Calculating NIM for different banks in public and private sector Identifying the impact of CASA accounts in the NIM. Research Methodology Statement of the Problem NIM and CASA are an integral part of every Indian bankers vocabulary these days and analysts are busy dissecting these two parameters to gauge a banks profitability. How is NIM measured and whats the connection between NIM and CASA? Data collection Details of CASA movements during last two years will be collected based on the reporting to regulatory authorities by the selected banks .

Analysis and interpretation interest rates of current accounts and savings accounts of the selected banks during the corresponding period will be examined. A corresponding correlation coefficient will be ascertained to calculate the sensitivity of casa and interest rates on net interest income of the selected banks. This will be linked with expense ratio relating to cost of expanding casa base of banks. In this connection, appropriate assumption and the required models will be constructed on the basis of evaluation summarized Conclusion Conclusions based on the processed data will be included as a part of project. Where ever possible, appropriate suggestions will be included in the project.