Savings Bank Account Low interest Rates: Investors rush to liquid mutual funds..!
By Mr. Yaseen Sahar, Financial
Expert
Large private banks have cut savings bank account rates.
With savings bank interest rates at historic lows,
individual investor interest is picking up in liquid mutual funds (MFs), which
delivered a consistent returns of 5% to 7 per cent annually.
These funds added more than 2,20,000 accounts in 2025
(till July 31) as against just 64,300 net additions in 2024 and 4,345 in 2023.
In 2025 July, net addition was at a multi-year high of 1,08,500.
Liquid mutual funds are a type of debt mutual fund that
primarily invests in short-term money market instruments with a maturity period
of 91 days or less. These instruments include treasury bills,
commercial papers, and certificates
of deposit.
Liquid funds are known for their high liquidity, meaning
investors can easily access their money, often within a day, and their low risk
profile. They are suitable for investors seeking to park short-term funds and
earn slightly better returns than savings accounts, while preserving capital.
Here's a more detailed explanation:
Investment
Focus:
Liquid
funds invest in a variety of short-term debt instruments, aiming for capital
preservation & easy liquidity.
Maturity
Period:
These funds typically invest in instruments with a
maturity of 91 days or less, ensuring high liquidity.
Low Risk:
Due to the short maturity and high credit quality of the
underlying instruments, liquid funds are considered one of the safest mutual
fund options.
High Liquidity:
Investors can easily redeem their units, usually within
one working day, making it ideal for managing short-term cash needs.
Returns:
While returns are generally lower than other mutual fund categories,
they are typically higher than savings accounts.
Suitable for:
Investors looking for a safe place to park short-term
funds, build an emergency fund, or for temporarily holding cash before
reinvesting.
Taxation:
Any returns or profits earned from liquid funds are
generally taxed according to the individual's income tax slab. Only capital
gains are taxed.
No Lock-in Period:
Unlike fixed deposits, liquid funds do not have a lock-in
period, allowing for easy access to funds
Mr. Yaseen Sahar has been reached at rahas84@gmail.com and 98433 13512
Read articles written by Mr. Yaseen Sahar,
Financial Expert in Nanayam Vikatan, Aval
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