In a world where every rupee counts, Indian savers are starting to ask a simple question — why settle for 2.5 to 4 percent interest in a traditional savings account when better options exist? Enter liquid funds, a category of mutual funds that is quickly gaining popularity for offering higher returns with reasonable safety and liquidity. In 2025, liquid funds are not just a trend but a smart strategy for managing idle cash, and they are quietly reshaping India’s financial landscape.
What Are Liquid Funds
Liquid funds are a type of debt mutual fund that invests primarily in high-quality, short-term instruments like treasury bills, commercial paper, and certificates of deposit. Their maturity profile is typically up to 91 days, which keeps interest rate risk low.
They are designed to deliver returns slightly higher than a bank savings account while still allowing easy withdrawal, often within one working day. In simple terms, they blend the accessibility of a savings account with returns closer to short-term fixed deposits.
Why Liquid Funds Are Gaining Ground
There are several reasons why Indian investors are shifting a portion of their money from savings accounts to liquid funds.
First, returns are meaningfully higher. As of mid-2025, many liquid funds are delivering annualized returns of around 5.5 to 6.5 percent, comfortably beating most savings accounts.
Second, liquid funds have become more transparent and better regulated after reforms from SEBI and RBI, which improved disclosure standards and reduced risks of portfolio concentration.
Third, technology has made investing in liquid funds almost as simple as managing a savings account. Today, you can invest or redeem through apps with a couple of taps, giving you nearly the same convenience but with better yields.
Risk Factors to Consider
Although liquid funds are among the safest mutual funds, they are not entirely risk-free. Unlike bank deposits, they are subject to market fluctuations, however minor, and do not carry deposit insurance.
Investors should also understand that returns, while generally steady, are not guaranteed. Sudden economic shocks or credit events in the debt market could impact them, though the impact is typically far smaller than in other categories of mutual funds.
It is always wise to check the fund’s portfolio quality, average maturity, and past volatility before making a decision.
Who Should Use Liquid Funds
Liquid funds make the most sense for investors who want to park surplus cash for short durations — from a few days to a few months — but want more than the minimal interest of a savings account. They can also be used by businesses for managing working capital, or by individuals to build an emergency corpus.
Their flexibility and relative safety have made them a practical alternative to savings accounts, especially in a world where inflation can quietly erode purchasing power.
Indira Securities: Helping You Invest Better
If you are exploring liquid funds as part of your cash management, Indira Securities provides tools to help you evaluate, monitor, and invest in them confidently. Its Mobile Trading App and convenient Demat account opening process allow you to compare different liquid fund options and track your investments in real time, all without unsolicited advice or forced stock calls.
Indira Securities is recognised as one of the best stock market platforms in India, empowering investors with data-backed insights and user-friendly features to make disciplined, independent choices.
Conclusion
The rise of liquid funds in India shows how savers are becoming smarter about where they park their idle cash. With better yields, convenient access, and transparent risk profiles, liquid funds are proving that you do not have to sacrifice safety to beat your savings account returns.
For those willing to learn the basics and stay disciplined, liquid funds can be a valuable part of a well-rounded financial strategy.
Disclaimer
This blog is purely for educational purposes and should not be considered investment advice. Please do your own research or consult a registered financial advisor before making any investment decisions.