Rs 1 lakh in your savings A/C? Why it's time to move it out

Have Rs 1 lakh sitting idle in your savings account? If so, now might be the time to think about moving it out. With the recent RBI repo rate cut, banks have begun to lower their savings account rates.

HDFC Bank, for instance, has reduced its rate on balances of Rs 50 lakh and above to 2.75 per cent from the earlier 3.25 per cent. Other banks could likely follow suit. This means that if you’ve been letting your money sit in a savings account, it’s likely going to earn even less than before.

But what if there was a smarter way to park your money and earn better returns without taking on much risk? Enter liquid funds—ideal for those who want to access their money quickly while still earning better returns than a savings account.

Let’s dive into why switching from your savings account to liquid funds makes sense now.

Why you should park your money in a liquid fund now

1) Returns: Let’s make one thing clear. Liquid funds are primarily ideal for parking your idle money or emergency corpus, not for deriving high returns. However, they offer a high degree of safety and liquidity with better returns than a savings account. Savings rates generally vary between 2.7 to 3.5 per cent per annum, while liquid funds have offered 6.5 to 7.4 per cent over a year.

2) Ease of withdrawal: Liquid funds provide same-day or next-day redemption with zero exit loads. (Exit loads generally go away after the first 6-7 days.) That said, even if you withdraw money during the exit-load phase, the fees are minimal.

3) Lower risk: Though not risk-free, the risk in liquid funds is minimal, as they invest in short-term debt instruments with less than 91 days' maturity, making them relatively insulated from interest rate fluctuations.

The bottom line: Smarter than a savings account

With interest rates dropping, your savings account will be earning you less than before. Liquid funds, on the other hand, offer easy access, minimal risk and higher returns. If you just need a place to park cash for the short term, liquid funds are the ideal place. You can find the best liquid funds, vetted by our analysts, from Value Research Fund Advisor.

Also read: Liquid funds vs Short-duration funds

This article was originally published on June 10, 2025.