Q. Consider the following statements: Assertion: Increase in the interest rate on Savings Bank account is favorable for the Banks which leverage the CASA Ratio Reason: CASA deposits are cheaper than Time Deposits
Choose the correct option:
Answer: Assertion is incorrect , Reason is correct
Notes: The correct answer is "Assertion is correct, Reason is incorrect." An increase in interest rates on Savings Bank accounts (CASA) can be favorable for banks as it may attract more deposits, enhancing their CASA ratio, which is beneficial because CASA deposits are typically cheaper than time deposits. However, if interest rates rise importantly, banks may face higher costs for maintaining these deposits, potentially negating the benefits. Thus, while the assertion is true, the reason does not accurately explain it.