Liquid fund investments via apps like Multipl and Simply Save offer higher returns. Exit loads and no deposit insurance can trim those yields. Here's what to watch.
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Cash optimization apps promise higher returns on idle cash by routing it into liquid funds or fixed deposits. The convenience comes with costs. Exit loads and missing deposit insurance can eat into yields, and the tax treatment is less favorable than a savings account.
These platforms allow users to park surplus cash in liquid mutual funds or fixed deposits, aiming for returns above the standard 2.5-3% savings account rate. Users authorize the deposit but cannot select specific funds or banks; the platform allocates to partner AMCs or banks. Multipl, for example, channels spending money into low-risk liquid funds with instant redemption options and brand discounts. Simply Save, operated by Nippon India Mutual Fund, routes idle cash into Nippon's own liquid fund and allows withdrawal through an ATM card issued with HDFC Bank. Jupiter relies on fixed deposits, letting users allocate existing balances into separate 'Pots' or lock-in fixed deposits.
"We have taken the liquid fund route because redeeming other mutual funds normally takes around 48 hours," said Rajju Choudhary, vice-president of partnerships and alliances at Multipl. "Money is supposed to earn for you." Every time a user spends at a partner brand, they can instantly redeem money from the liquid fund and purchase a brand voucher at a 2% to 7% discount. The discount is capped at one transaction per brand each month. The platform charges a 0.5% fee on redemptions through partner brands.
"The catch is that once money is swept out, it is no longer a bank deposit and sits outside DICGC insurance," said Tajinder Virk, co-founder and CEO of Finvasia Group. "Instant withdrawals are capped at ₹50,000 or 90% of the folio value per day." An exit load also applies during the first six days. The exit load starts at 0.0070% on day one and drops daily to 0.0045% by day six. From the seventh day, there is no exit load. Overnight funds have no exit load, making them a better choice for very short-term parking.
Virk also warned that users should check whether the platform invests in a direct plan or a regular plan. A regular plan includes a trail commission for the distributor. Multipl operates as a mutual fund distributor, meaning users' funds go into regular plans with higher expense ratios. Direct plan expense ratios range from 0.15% to 0.25%, while regular plans run from 0.20% to 0.50%.
Gains from debt funds are taxed at the investor's income tax slab rate, regardless of holding period. Savings account interest qualifies for a deduction of up to ₹10,000 per year under Section 80TTA under the old tax regime. Liquid funds do not offer that deduction. "For an investor in the 30% bracket, a 6.3% gross return translates to roughly 4.4% post-tax," Virk said.
Adhil Shetty, CEO of Bankbazaar, said consumers should look beyond the promised return and understand where the money is invested, how quickly it can be accessed, the tax treatment, and any conditions attached to rewards. He said the most value comes from using these apps for planned short-term expenses. Emergency funds should be parked in instruments with immediate access and greater certainty.
Liquid funds currently offer annual yields of roughly 6% to 6.5%. For a 30% tax bracket investor, the post-tax return is closer to 4.4%. An exit load can further reduce the effective yield if the money is withdrawn within six days. The math works only if you hold for at least seven days and use the apps for funds you know you won't need immediately.
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