Low savings account rates fuel a rush to liquid funds

Net new account openings swell to 220,000 in 2025

- ABHISHEK KUMAR & MANOJIT SAHA

With savings bank interest rates at historic lows, individual investor interest is picking up in liquid mutual funds (MFs), which delivered a consistent returns of 5-7 per cent annually.

Such funds invest in highly liquid debt instruments having a maturity period of fewer than 91 days.

These funds added more than 220,000 accounts in 2025 (till July 31) as against just 64,300 net additions in 2024 and 4,345 in 2023. In July, net addition was at a multi-year high of 108,500.

The uptick comes after large commercial banks reduced interest rates on savings accounts following a reversal in the interest-rate cycle with the Reserve Bank of India (RBI) starting to cut the policy repo rate from February this year.

Till now, the rate-setting panel of the RBI cut the policy repo rate by 100 basis points to 5.5 per cent.

In response, banks, apart from reducing fixed-deposit rates, cut savings account interest rates.

State Bank of India (SBI), the country's largest lender, is offering 2.5 per cent on savings accounts from June 16 this year.

In 2019, SBI was giving 3.5 per cent for up to 1 lakh in savings deposits, but the rate was reduced to 2.7 per cent in May 2020.