Mumbai: Jio Financial Services Ltd’s payments bank arm will soon launch a product that automatically invests idle balances from savings accounts into overnight mutual funds, according to a top executive.
Deposits at Jio Payments Bank and transaction processing volumes in its payments solutions business have seen significant growth, underlining the scale-up of these operations, managing director and chief executive officer (CEO) Hitesh Sethia said at the company’s annual general meeting on Thursday.
Overnight mutual funds are considered the safest kind of scheme as they invest in short-term instruments like overnight repo and government securities with a one-day maturity. As per the Jio Payments Bank website, savings deposits currently earn 2.5% interest, whereas overnight mutual funds usually yield around the Reserve Bank of India’s repo rate. The repo rate now stands at 5.5%.
Analysts said the launch of the new product, Savings Pro, could disrupt the banking industry by putting idle funds in savings accounts to more productive use. It was not immediately clear which mutual funds the auto-invest feature would deploy customer balances into.
“This is interesting. A large player is enabling a mechanism that can put funds idling in savings accounts to work at a higher rate,” said Dhirendra Kumar, founder and CEO of Value Research. “In overnight funds, instant redemption up to ₹50,000 is possible.”
Overnight funds have returned slightly over 6% in the past year, compared with 2.5-2.75% offered on savings deposits by most major banks.
“Overnight funds offer 2.5-3% above the savings account rate. Plus, there is daily compounding in overnight funds, which is not necessarily the case in savings accounts. So, this can be a big disruptor,” said Suresh Darak, founder and CEO of Bondbazaar.
Mintreported in June that large lenders such as State Bank of India, HDFC Bank and ICICI Bank lowered their savings deposit rates to 2.5-2.75%, the lowest since RBI began collecting such data in FY01.
Similar to a sweep-in facility
Some banks offer a sweep-in facility that automatically parks surplus balances above a threshold into fixed deposits. To be sure, Jio Payments Bank is not the first to try this. Private sector lender ICICI Bank had in 2002 announced its ‘Mutual Fund Sweep Account’, although it was limited to current account holders.
“This is an extension of sweep accounts. Generally, savings rates are trending downward,” said Vishal Dhawan, founder of Plan Ahead Wealth Advisors. “With fixed deposits, the issue is that they may be created for one purpose, but depositors often withdraw them for another. Since these withdrawals usually happen before the original tenure ends, the rates are lower and, in many cases, attract a penalty.”
Dhawan said automating investment in overnight funds “takes away the need to make some of those decisions”. “However, more clarity will be needed on how much balance would have to be maintained, given this is coming from a payments bank, and how accessibility would work across multiple channels, since money in a savings account can be easily accessed through different platforms.”
Bank deposit rates have hit historic lows on account of outsized repo rate cuts. Savings deposit rates have plunged to a 25-year low and fixed deposit rates have seen steep cuts.
Specifics needed
Saurabh Mittal, a registered investment advisor (RIA) and founder of Circle Wealth Advisors, said depositors can withdraw money anytime in a sweep-in FD, but it remains to be seen how the mechanics will work with mutual funds.
“Redemptions in mutual funds typically take one working day, apart from the day of trade execution, to reach the investor’s bank account. It also requires an OTP foreach transaction,” he said. “Jio Payments Bank has yet to elaborate on the specifics of ‘Saving Pro’ scheme and how it will tackle the liquidity issue of the client’s funds.”
Last month, Jio BlackRock Mutual Fund, the joint venture between Reliance’s Jio Financial Services and global asset manager BlackRock, launched three debt funds: an overnight fund, a liquid fund, and a money market fund. The schemes together raised ₹17,800 crore in their debut offering, one of the strongest fund launches in the country’s debt market.
At the end of Q1FY26, Jio Payments Bank reported that its CASA (current and savings account) base rose to 2.58 million customers and deposits reached ₹358 crore. This growth, Sethia said, was driven by the bank’s expanding footprint, with a nationwide network of over 50,000 business correspondents (BC).
NDTV Profit in June reported that SBI sold its entire 7.9 crore equity shares in Jio Payments Bank to Jio Financial Services for ₹104.5 crore, marking its complete exit from the joint venture it had set up with Reliance in 2016.
Jash Kriplani and Sashind Ningthoukhongjam have contributed to the story