Whereas financial institution financial savings accounts now yield as little as 2.7–2.75%, liquid mutual funds provide returns of 5-6%. Which means your idle money doesn’t simply sit—it grows, even because it stays immediately spendable. In a low-interest setting, this might make mutual funds a compelling various to conventional financial institution deposits.
What Curie Cash is constructing
On the centre of this new experiment is Curie Cash, a fintech startup that goals to blur the traces between your funding account and your funds app.
Curie lets customers make UPI funds which are immediately debited from their liquid mutual fund items—basically turning your investments right into a real-time, spendable pockets.
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The concept builds on a facility the Securities and Alternate Board of India (Sebi) has allowed since 2017: instantaneous redemptions of as much as ₹50,000 or 90% of the funding (whichever is decrease) from liquid and in a single day funds.
However not like asset administration firms (AMCs) that supply this with a separate redemption request, Curie hyperlinks it on to UPI funds. Scan a QR code, approve the fee, and the redemption request is auto-triggered within the background. It’s UPI as common, besides you get emails and SMS alerts from the AMC in regards to the items redeemed.
There’s a catch, although. Sebi hasn’t explicitly allowed or barred UPI-linked redemptions from such funds. The regulator permits instantaneous redemption however doesn’t specify how that cash needs to be used.
So long as fintech firms respect trade limits and investor safeguards, the setup is broadly compliant, though it falls in a regulatory gray zone, mentioned trade specialists. If something goes mistaken, the accountability would lie not with Sebi or the Nationwide Funds Corp. of India however with the mutual fund’s AMC, they added.
Curie, which operates as a mutual fund distributor, has simply emerged from beta testing. The variety of transactions—and the worth moved—remains to be minuscule. It helps financial institution accounts from a number of lenders, however works greatest with Sure Financial institution on account of deeper integration. And it solely allows investments in common plans, which permit it to earn distributor commissions.
Nevertheless, liquid funds carry comparatively low expense ratios—for instance, ICICI Prudential Liquid Fund’s common plan fees simply 0.3%.
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One friction level is psychological: every transaction sends an SMS and e-mail from the AMC, which might stress some customers. There’s additionally a minor delay on account of backend integrations—it takes just a few additional seconds in comparison with a traditional UPI fee.
Curie has tried to scale back this by providing customers the choice to load as much as ₹2,000 into UPI Lite, which doesn’t require a PIN, however that function doesn’t earn curiosity—undermining the core enchantment of the product.
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Why liquid funds are drawing consideration
With inflation hovering at 5-6%, and life-style prices rising quicker nonetheless, financial savings accounts and even sweep-in fastened deposits provide little actual return. The hole between what you earn and what issues price is widening. Liquid funds assist plug that hole with a key benefit: returns that aren’t simply greater, however extra effectively taxed.
Liquid mutual funds put money into short-term debt and are thought of low-risk. When redeemed—even for only a few days—they provide pro-rata returns (5-6% annualised). And in contrast to financial institution FDs, which incur tax on an accrual foundation and entice 10% tax deduction at supply, mutual funds don’t have computerized deductions.
“Every redemption is taxed underneath the first-in-first-out (FIFO) system of accounting. Out of the redemption quantity, solely the features over and above the principal funding are taxed,” defined chartered accountant Chirag Wadhwa. This implies buyers are usually not taxed on your complete withdrawal quantity however solely on the incremental features, making mutual funds a extra tax-friendly instrument in comparison with conventional financial institution merchandise.
“If handled as capital features, short-term losses may be set off towards short-term features, and long-term losses towards both long- or short-term features,” Wadhwa added.
Losses not utilized in a given yr may be carried ahead for as much as eight years—providing buyers room to optimise taxes. Enterprise earnings remedy might apply in some instances, however the tax arbitrage over FDs stays significant for many customers.
In distinction, Chirag mentioned, FDs are typically taxed on an accrual foundation, except particularly opted for money foundation taxation, and banks sometimes deduct TDS at 10% on the curiosity. “There is no such thing as a TDS on mutual funds, supplied the earnings from redemption is taken into account as capital features and never enterprise earnings,” he emphasised, highlighting one other operational benefit in favor of mutual funds.
What might unlock the subsequent stage
For this mannequin to scale, regulatory and market assist should fall into place.
Abhishek Kumar, a Sebi-registered funding advisor and founding father of SahajMoney, mentioned Curie and comparable platforms are appearing as market makers by offering liquidity by way of liquid funds. However to develop, they’ll want wider AMC partnerships (Curie at present lists just one on its web site) and extra financial institution integrations to boost person selection.
However the largest barrier is probably not expertise—it’s psychology.
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Girish Ganaraj, an authorized monetary planner, a Sebi-registered funding advisor, and founding father of Finwise Monetary Planners & Advisors, mentioned retail buyers nonetheless affiliate mutual funds with long-term, equity-linked investments. In distinction, financial savings accounts and FDs are perceived as “my cash in my account”—fast and accessible. That notion hole makes customers hesitant to deal with mutual fund items as readily spendable money, even when the product permits it.
Vishal Dhawan, one other Sebi-registered funding advisor and founding father of Plan Forward Advisors, echoed this view. “Mutual funds proceed to be perceived as devices for fairness market publicity,” he mentioned, stating that few buyers are conscious of their short-term liquidity potential. That disconnect is without doubt one of the key challenges stopping the widespread adoption of instantaneous redemption options.
In keeping with Ganaraj, UPI may very well be the killer hook. By linking mutual funds on to UPI funds, fintechs eradicate the friction sometimes related to fund withdrawals. That would assist reframe liquid mutual funds as viable, even superior, alternate options to financial savings accounts and sweep-out FDs—particularly given their decrease prices and higher tax effectivity.
The stakes are excessive: greater than ₹84 trillion is at present parked in financial savings and present accounts. Even a modest shift from this pool into mutual funds would mark a dramatic growth of the retail investor base.
For now, although, scale stays restricted. The ₹50,000 per AMC redemption cap means fintechs should accomplice with a number of fund homes to allow significant transaction volumes. Curie can develop its tie-ups to supply customers extra flexibility, doubtlessly enabling instantaneous redemptions of ₹2–3 lakh with simply 5 to 6 AMCs.
The technical dangers have already been evaluated. When Sebi first allowed instantaneous redemptions, it required AMCs to take care of money buffers to satisfy sudden outflows—making certain liquidity in most situations.
Trying forward, the chance might develop dramatically if Sebi raises instantaneous redemption limits or extends the ability to different fund classes—reminiscent of cash market or arbitrage funds, notably these taxed as fairness. That might considerably enhance the tax effectivity of mutual funds in comparison with financial savings accounts.
Underneath the brand new tax regime, deductions underneath Sections 80TTA and 80TTB—on financial savings account curiosity—are not out there, and such curiosity is taxed at slab charges. In distinction, arbitrage or equity-oriented funds get pleasure from preferential tax remedy, particularly when held for over a yr. If regulators act on this, mutual funds might turn out to be an much more compelling various.
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Ganaraj believes the redemption cap needs to be raised to ₹5 lakh to make this a really viable alternative for conventional money financial savings.
The imaginative and prescient is daring: a digital financial savings account powered not by banks, however by mutual funds. Whether or not it takes off will depend upon how briskly regulators transfer—and the way prepared buyers are to rethink what “cash within the financial institution” actually means.
