Mandatory savings investments in designated sectors
In the realm of Indian banking, a phenomenon known as the Cognitive CASA Bias has emerged, affecting the deposit composition within Current Account-Savings Account (CASA) accounts. Despite a lack of explicit regulatory stance by the Reserve Bank of India (RBI) on this issue as of August 2025, insights can be drawn from general banking and regulatory practices.
The RBI recognises the importance of CASA deposits, which are low-cost funds compared to term deposits. However, these deposits often skew towards higher-tier customers, leading to a bias where lower-tier or financially underserved segments contribute less to stable low-cost deposit bases.
To address this issue, the RBI could potentially introduce measures such as incentivising banks to deepen CASA penetration among lower tiers, promoting financial literacy and behavioural nudges, encouraging innovative deposit products, and mandates on inclusive banking.
The RBI has a history of promoting financial inclusion through various schemes, indirectly influencing CASA composition by increasing savings account penetration in lower-income groups. However, without specific recent regulatory announcements or RBI policy updates directly discussing Cognitive CASA Bias or targeted CASA pyramid interventions, the best source of RBI’s current stance would be their official releases or circulars on deposit schemes, financial inclusion, or CASA management.
Banks, on the other hand, have the freedom to set minimum balance thresholds without regulatory restrictions. With approximately 63% of the population covered under social security schemes, maintaining even a ₹10,000 average balance in a savings account remains a significant challenge for the majority of Indians, whether in rural or urban branches.
As depositors move their funds to higher-yielding fixed deposits, mutual funds, and equities, banks respond by focusing on this "creamy layer" of CASA depositors, neglecting the middle and lower tiers of the CASA pyramid. This disparity creates an uneven playing field and fuels systemic risk.
The RBI, while stating that minimum balance thresholds are outside its regulatory purview, still has a role in guiding policies that strengthen the country's deposit structure. Thinner-margin banks may be stretched thin, limiting credit availability. Nudging rather than targets would reward organic growth of small depositors.
In a positive development, a private bank has recently reduced its average minimum balance requirement for deposit accounts in metros from ₹50,000 to ₹15,000, and in other categories as well. Defining what qualifies as Priority Sector Deposits (PSD) would require bank-wide data analysis, such as considering savings accounts under ₹10,000 and current accounts under ₹20,000.
The integration of PSD with NDTL reporting would allow for tracking PSD through existing fortnightly submissions for RBI oversight without adding extra burden. The RBI could also introduce a PSD framework to reward deposits from lower CASA tiers. Furthermore, the Unified Lending Interface (ULI) is set to expand micro-lending to low-income households, potentially aiding in increasing CASA deposits from these segments.
In conclusion, while no direct regulatory stance on Cognitive CASA Bias has been found in the provided sources, potential RBI actions to encourage deposits from lower tiers may include targeted financial inclusion policies, behavioural incentives, and product innovation. For the latest RBI circulars or official statements on the subject, consulting the RBI’s official website or notifications would be necessary.
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