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From a strategic perspective, why do banks prefer CASA deposits over term deposits?

hard Q9 of 15
Banking Awareness - Types Of Bank Accounts
From a strategic perspective, why do banks prefer CASA deposits over term deposits?
AThey reduce interest expense
BThey eliminate liquidity risk
CThey increase loan defaults
DThey remove regulatory oversight
Step-by-Step Solution

  1. Step 1: Compare cost structures.

    CASA deposits pay low or zero interest.

  2. Step 2: Identify strategic benefit.

    Lower interest expense boosts profitability.

  3. Final Answer:

    They reduce interest expense → Option A

  4. Quick Check:

    Lower payout = higher bank profit ✅
Quick Trick: CASA saves interest cost for banks.
Common Mistakes:
MISTAKES
  • Assuming CASA eliminates all risks.
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