liquid funds offer higher returns than savings accounts. lower risk than equity. money is usually accessible within a day .
returns on liquid funds are not fixed. they change with market interest rates. the goal is to find funds that consistently deliver better returns without taking unnecessary risk.
what returns to expect
liquid funds typically give 6.5% to 7.5% annual returns . savings accounts give 2.5% to 4% .
the difference matters for idle cash. ₹1 lakh in a savings account earns roughly ₹3,000 a year. the same amount in a liquid fund earns roughly ₹6,500 to ₹7,500.
funds with consistent performance
search results show some funds performing better over different time periods.
Bank of India Liquid Fund delivered 7.0% CAGR over three years . Axis Liquid Fund delivered 6.9% over three years and 3.3% over six months . Franklin India Liquid Fund-Super Inst delivered 0.6% over one month and 6.9% over three years .
Aditya Birla SL Liquid Fund has a large corpus of ₹63,686 crore . ICICI Pru Liquid Fund has ₹54,543 crore . Axis Liquid Fund has ₹56,167 crore .
| fund name | 3-year return | aum (₹ cr) | expense ratio |
|---|---|---|---|
| bank of india liquid fund | 7.0% | 1,720 | – |
| axis liquid fund | 6.9% | 56,167 | – |
| franklin india liquid fund-super inst | 6.9% | 2,915 | – |
| dsp liquidity fund | 6.9% | 19,019 | – |
| invesco india liquid fund | 6.9% | 16,796 | – |
the low-risk factor
liquid funds invest in instruments maturing within 91 days . this short window reduces risk. the borrower has little time to default.
modified duration is a key metric. lower duration means lower interest rate risk. union liquid fund has a modified duration of 33 days . bandhan liquid fund has 41 days . lower is better for stability.
returns can vary by period
no single fund leads across all timeframes. bank of india liquid fund leads on three-year returns . axis liquid fund leads on six-month returns . franklin india liquid fund-super inst leads on one-month returns .
this matters. a fund with strong short-term performance may not have the same longer-term track record. checking multiple periods gives a fuller picture.
how to compare liquid funds
expense ratio. lower is better. union liquid fund has 0.17% expense ratio . category average is 0.26% .
aum. larger funds handle redemptions better. aditya birla sl liquid fund has ₹63,686 crore . large size means stability.
yield to maturity. higher ytm means higher potential returns. union liquid fund has ytm of 7% . mahindra manulife liquid fund has ytm of 8% .
exit load. most funds charge a small fee if redeemed within 6 days . after 7 days, exit load is zero.
track record. look at 1-year, 3-year, and 5-year performance. consistency matters more than one good year.
FAQs
1. which liquid fund has the highest returns in 2026?
bank of india liquid fund delivered 7.0% over three years . franklin india liquid fund-super inst delivered 0.6% over one month . returns vary by period.
2. are liquid funds completely safe?
liquid funds are low risk. they are not risk-free. credit risk and interest rate risk exist, but the short maturity window reduces both .
3. how quickly can money be withdrawn?
standard redemption takes one business day . some funds offer instant redemption up to ₹50,000 or 90% of the investment .
4. how are liquid funds taxed?
for units bought after april 1, 2023, gains are taxed at the income tax slab rate. no indexation. no ltcg benefit.
5. what is the minimum investment?
most funds accept ₹500 to ₹5,000 as minimum . sips can start from ₹100 to ₹500.
