Mutual Funds · Park cash here
Liquid Funds
Liquid funds invest in high-quality money-market instruments (T-bills, CPs, CDs) with maturity ≤ 91 days. Best emergency-fund parking — earn 6.5-7.2% vs 3-4% in savings account. T+1 redemption (next-day money in account). After Apr 2023 tax change, returns are now slab-taxed but still beat savings interest by 250-400 bps.
Who needs this
Anyone with idle cash: emergency fund, surplus savings, awaiting deployment, business working capital. Replaces the savings-account 'parking' use-case for amounts > ₹50K.
Category at a glance
Maturity profile
≤ 91 days
SEBI cap
Typical YTM
6.5-7.2%
Pre-tax
Volatility (std dev)
0.1-0.5%
Among lowest
Expense ratio
0.10-0.30%
Direct plan
Redemption
T+1
Same-day for ≤ ₹50K via instant
Tax
Slab rate
Post Apr-2023
Top 5 liquid funds
Source: AMFI + AMC factsheets · refreshed quarterly
| Fund | AMC | Expense % | 3y CAGR |
|---|---|---|---|
| ICICI Pru Liquid Fund | ICICI Pru | 0.20% | 6.8% |
| HDFC Liquid Fund | HDFC | 0.21% | 6.9% |
| Aditya Birla SL Liquid | Aditya Birla | 0.22% | 6.9% |
| Nippon India Liquid | Nippon | 0.24% | 6.8% |
| SBI Liquid Fund | SBI | 0.18% | 6.7% |
Key decisions
- Q1
Liquid or Overnight fund?
Overnight: maturity = 1 day, lowest risk + return (6.0-6.5%). Liquid: maturity ≤ 91 days, slightly higher return (6.5-7.2%) + tiny credit risk. For emergency fund: Liquid wins.
- Q2
Liquid fund or savings account?
Liquid wins on returns (250-400 bps higher) + same liquidity (T+1). Savings wins on absolute zero risk + DICGC ₹5L insurance + UPI integration. Use both: keep ₹1-2L in savings + rest in Liquid.
- Q3
Insta-redemption — how it works?
Most AMCs offer ≤ ₹50K instant redemption (push to bank in minutes, 24×7). Above ₹50K: T+1 settlement. Use for genuine emergency only (not daily cash flow).
SEBI rules + scheme specifics
- Liquid funds: portfolio average maturity ≤ 91 days (SEBI cap).
- Mark-to-market for instruments > 60 days; amortisation for < 60 days.
- Insta-redemption capped at ₹50K or 90% of folio value, whichever is lower.
- Side-pocketing allowed for distressed assets.
- Exit load: graded if redeemed within 7 days (most AMCs).
Calculators + tools
All mutual funds
Recommended →Free MF Overlap Analyzer — see if your funds duplicate