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How does a rising CASA ratio generally affect a bank’s Net Interest Margin (NIM)?

medium Q6 of 15
Banking Awareness - Types Of Bank Accounts
How does a rising CASA ratio generally affect a bank’s Net Interest Margin (NIM)?
AReduces NIM
BImproves NIM
CHas no impact on NIM
DEliminates NIM
Step-by-Step Solution

  1. Step 1: Recall NIM concept.

    NIM depends on interest earned minus interest paid.

  2. Step 2: Link CASA to interest cost.

    Higher CASA lowers interest paid.

  3. Final Answer:

    Improves NIM → Option B

  4. Quick Check:

    Lower funding cost = higher NIM ✅
Quick Trick: More CASA = better margins.
Common Mistakes:
  • Thinking CASA affects only deposits, not margins.
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