Still earning 2.75% in your savings account? Here's a smarter option

Most people leave their extra money in a savings account because it feels safe and easy. But with low interest rates, that money isn't really growing, it's just sitting there, losing value to inflation.Following the Reserve Bank of India's (RBI) decision to cut the repo rate by 50 basis points, i.e., from 6% to 5.5%, several leading banks have slashed their savings account interest rates. The State Bank of India (SBI), the country's largest lender, has brought its rate down to a flat 2.5% per annum across all balances, effective June 15, 2025. HDFC Bank followed suit with a uniform 2.75%, starting June 10, and ICICI Bank did the same from June 12.advertisementNow let's be honest, with prices rising and your money earning just 2.5% or 2.75%, that doesn't do much for your wallet.SO, WHAT'S THE ALTERNATIVE?
One increasingly popular option is liquid funds — a low-risk, short-term investment that gives your idle money a chance to earn better returns without compromising on access or safety.To understand how they work and why they're gaining traction, IndiaToday.in spoke to Kaustubh Gupta, Co-Head, Fixed Income at Aditya Birla Sun Life AMC Ltd.WHAT ARE LIQUID FUNDS?Think of liquid funds as the middle ground between a savings account and fixed deposits, but with more flexibility and usually better returns.'Liquid funds are open-ended mutual fund schemes that invest in debt and money market securities with maturity of up to 91 days,' explains Gupta. 'These include Treasury Bills (T-Bills), Commercial Papers (CPs), Certificates of Deposit (CDs), CBLO and similar instruments.'advertisementThese funds are designed to serve as a short-term parking solution for your surplus funds, while offering reasonable returns. Because these funds invest in high-credit-quality instruments with short maturity periods, the risk of default or losing money is very limited, noted Gupta.DO THEY REALLY OFFER BETTER RETURNS?In most cases, yes. 'Liquid funds are more responsive to the market and adjust their holdings with interest rate movements, unlike savings' accounts which offer fixed, lower returns,' says Gupta.While returns aren't guaranteed, the numbers speak for themselves. Over the past one and three years, liquid funds have delivered average annualised returns of 7.3% and 7% respectively. Compare that to 2.5–2.75% in a savings account, and the difference is clear, pointed out Kaustubh Gupta.In short, liquid funds help your money keep pace with inflation, something most savings accounts fail to do.ARE THEY SAFE?A valid concern, especially when it comes to short-term cash.Gupta reassures, 'Liquid funds have become a go-to choice for many looking to park idle cash. With their focus on high-quality, low-risk short-term debt, they offer not just safety, but better returns than your average savings account - all without locking away your money.'HOW QUICKLY CAN YOU GET YOUR MONEY?advertisementThis is where liquid funds shine. They offer high liquidity, allowing redemptions within one working day (T+1).'Investors can further take advantage of an instant redemption facility to redeem up to Rs 50,000 per scheme per day through online mode on a T+0 basis, bringing liquid funds at par with savings bank accounts,' Gupta noted.'There's no lock-in,' he points out. 'Withdrawals can be made any time, making them ideal for managing short-term needs.'However, while redemptions are continuous, short exit loads may apply if withdrawals occur within the first seven days, pointed out Gupta.SHOULD YOU CONSIDER SWITCHING?If you've got money sitting in your savings account that you don't need immediate access to, liquid funds are certainly worth considering.Gupta explains, 'They're ideal for investors with short-term goals, ranging from a few days to a few weeks, who want better returns without giving up too much liquidity.''Liquid funds are suitable for those willing to accept minimal risk for potentially higher returns than a traditional savings account,' he added.In other words, it's easy to overlook your savings account's performance — until you realise it's barely keeping your money afloat in today's economy. Liquid funds offer a chance to change that, giving you better returns, without taking big risks.(Disclaimer - This article is for general informational purposes only and does not constitute financial advice. Readers are encouraged to consult a certified financial advisor before making any investment or financial decisions. The views expressed are independent and do not reflect the official position of the India Today Group.)Tune InMust Watch

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

India Gazette

33 minutes ago

• India Gazette

L&T lists India's first ESG bonds worth 500 crore on NSE

Mumbai (Maharashtra) [India], June 23 (ANI): Infra and technology company Larsen & Toubro (L&T) has listed India's first ESG bonds on the National Stock Exchange (NSE), setting a precedent for a greener and more sustainable financial future in India. In a statement, the company said it has successfully raised Rs 500 crore through Non-Convertible Debentures (NCD) at a coupon rate of 6.35 per cent under the Securities and Exchange Board of India's (SEBI) newly introduced ESG (Environment, Social and Governance) and sustainability-linked bond framework. The NCDs, having a three-year maturity period, will mature on June 19, 2028, and the interest would be paid on an annual basis. 'Issued in partnership with HSBC, who served as the sole lead arranger, this landmark transaction adheres strictly to SEBI's regulatory guidelines introduced on June 5, 2025, aimed at enhancing transparency and accountability among bond issuers,' the company said. The framework mandates key disclosures, including sustainability objectives, external evaluations such as Second-Party Opinions (SPOs), and continuous postissuance reporting, with clear Key Performance Indicators (KPIs) to measure ESG impact. Commenting on the listing, R Shankar Raman, President, Whole-time Director and CFO, L&T said, 'We are proud to lead India's transition to sustainable finance through this pioneering ESG bond listing. This initiative underlines our dedication to long-term sustainable development and positions us at the forefront of responsible corporate governance and environmental stewardship.' 'This deal reinforces our commitment to driving L&T's ESG goals and supporting the larger energy transition objective,' R Shankar Raman added. The company added this successful issuance is a significant milestone in India's financial markets, illustrating growing investor appetite for ESG-compliant financial instruments and setting a benchmark for future sustainable financing ventures. (ANI)

Indian Express

34 minutes ago

• Indian Express

Qatar home to over 8 lakh Indians, Delhi monitors unfolding situation, alerts its nationals

A worried Delhi was monitoring the situation in Qatar where more than 8 lakh Indians live and work, and the Indian embassy asked the community to be cautious as Iran launched a military attack Monday night on a US base in Qatar. The Indian embassy in Doha said, 'In view of the ongoing situation, the Indian community in Qatar is urged to be cautious and remain indoors. Please remain calm and follow local news, instructions and guidance provided by Qatari authorities. The Embassy will also keep updating through our social media channels.' The Indian community is the largest expat community in the country, which has one of the highest per capita income in the world. Iran said it launched a military attack on the Al Udeid air base in Qatar, the largest US military installation in the region, according to a statement by the country's armed forces. A senior White House official earlier confirmed that the US was aware of a potential attack by Iran against the Al Udeid air base. An Israeli official also said Iran was poised to strike the base. India has had a robust political and economic relationship with Qatar, and has maintained high-level contacts. Prime Minister Narendra Modi travelled to Qatar on February 14-15, 2024. This was his second visit to Qatar. Modi had been on a state visit to Doha on June 4-5, 2016. The over 8.3 lakh-strong Indian community is the largest expatriate community in Qatar and is engaged in a wide spectrum of professions including medicine, engineering, education, finance, banking, business and media apart from a large number of blue-collared workers. There are over 20,000 big and small Indian companies operating in Qatar, either wholly-owned or joint ventures, in sectors like infrastructure, communications and information technology, energy. According to Invest Qatar, Indian companies have invested over USD 350 million in Qatar for the period 2017-2025. Indian companies from across sectors have been present in Qatar for over several years. Some of these include L&T, Shapoorji Pallonji, Wipro, TCS, Tech Mahindra, Lulu Group, Malabar and Tanishq. Currently, there are over 60,000 Indian students studying in 19 Indian schools and a few in international schools all over Qatar. There are approximately 4,500 faculty and non-faculty in Indian Schools alone. Sources said Delhi will be looking at the welfare of the Indians in the country, and take all measures. Shubhajit Roy, Diplomatic Editor at The Indian Express, has been a journalist for more than 25 years now. Roy joined The Indian Express in October 2003 and has been reporting on foreign affairs for more than 17 years now. Based in Delhi, he has also led the National government and political bureau at The Indian Express in Delhi — a team of reporters who cover the national government and politics for the newspaper. He has got the Ramnath Goenka Journalism award for Excellence in Journalism '2016. He got this award for his coverage of the Holey Bakery attack in Dhaka and its aftermath. He also got the IIMCAA Award for the Journalist of the Year, 2022, (Jury's special mention) for his coverage of the fall of Kabul in August 2021 — he was one of the few Indian journalists in Kabul and the only mainstream newspaper to have covered the Taliban's capture of power in mid-August, 2021. ... Read More

Mint

44 minutes ago

• Mint

Fin min, RBI meet govt officials on scaling up Unified Lending Interface

M. Nagaraju, secretary, department of financial services (DFS) and officials of the Reserve Bank of India on Monday held a meeting with officials from various ministries and departments of the Union and state governments on scaling up the planned Unified Lending Interface (ULI). ULI is an online platform that provides consent-based financial and non-financial data of borrowers from multiple service providers to lenders. The main aim of ULI is to support micro, small and medium enterprises. Currently, ULI is in its testing phase and its nationwide launch is awaited. Participants at the meeting, called by the finance ministry, included senior officials from 13 ministries and Departments of the Union government, 11 state governments, RBIH (Reserve Bank Innovation Hub) RBI and DFS. Nagaraju said ULI is envisioned as a digital public infrastructure for credit delivery—designed to integrate technology, data, and policy into one seamless platform. He also urged stakeholders to nominate nodal officers for fast-tracking the integration of government datasets with ULI in order to make ULI India's next UPI on the credit side. This unified interface is expected to reduce paperwork and time spent in the lending process. The platform would provide borrowers with data on a unified platform and help speed up loan approvals by reducing the time taken in data collection from multiple sources. ULI will allow lenders to access the financial and non-financial data of customers including land records, credit scores, etc through a consent-based system. This platform will collect the data from multiple sources in a single place. The main objective of ULI is to speed up the loan approval process by providing easy data access to lenders. It will be helpful for borrowers seeking quick loan approvals and lenders who need financial and non-financial data of borrowers for quick verification.