While bank savings accounts now yield as little as 2.7–2.75%, liquid mutual funds offer returns of 5-6%. That means your idle cash doesn’t just sit—it grows, even as it remains instantly spendable. In a low-interest environment, this could make mutual funds a compelling alternative to traditional bank deposits.
What Curie Money is building
At the centre of this new experiment is Curie Money, a fintech startup that aims to blur the lines between your investment account and your payments app.
Curie lets users make UPI payments that are instantly debited from their liquid mutual fund units—essentially turning your investments into a real-time, spendable wallet.
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The idea builds on a facility the Securities and Exchange Board of India (Sebi) has allowed since 2017: instant redemptions of up to ₹50,000 or 90% of the investment (whichever is lower) from liquid and overnight funds.
But unlike asset management companies (AMCs) that offer this with a separate redemption request, Curie links it directly to UPI payments. Scan a QR code, approve the payment, and the redemption request is auto-triggered in the background. It’s UPI as usual, except you get emails and SMS alerts from the AMC about the units redeemed.
There’s a catch, though. Sebi hasn’t explicitly allowed or barred UPI-linked redemptions from such funds. The regulator permits instant redemption but doesn’t specify how that money should be used.
As long as fintech companies respect industry limits and investor safeguards, the setup is broadly compliant, although it falls in a regulatory grey zone, said industry experts. If anything goes wrong, the responsibility would lie not with Sebi or the National Payments Corp. of India but with the mutual fund’s AMC, they added.
Curie, which operates as a mutual fund distributor, has just emerged from beta testing. The number of transactions—and the value moved—is still minuscule. It supports bank accounts from multiple lenders, but works best with Yes Bank due to deeper integration. And it only enables investments in regular plans, which allow it to earn distributor commissions.
However, liquid funds carry relatively low expense ratios—for example, ICICI Prudential Liquid Fund’s regular plan charges just 0.3%.
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One friction point is psychological: each transaction sends an SMS and email from the AMC, which can stress some users. There’s also a minor delay due to backend integrations—it takes a few extra seconds compared to a normal UPI payment.
Curie has tried to reduce this by offering users the option to load up to ₹2,000 into UPI Lite, which doesn’t require a PIN, but that feature doesn’t earn interest—undermining the core appeal of the product.
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Why liquid funds are drawing attention
With inflation hovering at 5-6%, and lifestyle costs rising faster still, savings accounts and even sweep-in fixed deposits offer little real return. The gap between what you earn and what things cost is widening. Liquid funds help plug that gap with a key advantage: returns that are not just higher, but more efficiently taxed.
Liquid mutual funds invest in short-term debt and are considered low-risk. When redeemed—even for just a few days—they offer pro-rata returns (5-6% annualised). And unlike bank FDs, which incur tax on an accrual basis and attract 10% tax deduction at source, mutual funds don’t have automatic deductions.
“Each redemption is taxed under the first-in-first-out (FIFO) system of accounting. Out of the redemption amount, only the gains over and above the principal investment are taxed,” explained chartered accountant Chirag Wadhwa. This means investors are not taxed on the entire withdrawal amount but only on the incremental gains, making mutual funds a more tax-friendly instrument compared to traditional bank products.
“If treated as capital gains, short-term losses can be set off against short-term gains, and long-term losses against either long- or short-term gains,” Wadhwa added.
Losses not used in a given year can be carried forward for up to eight years—offering investors room to optimise taxes. Business income treatment may apply in some cases, but the tax arbitrage over FDs remains meaningful for most users.
In contrast, Chirag said, FDs are generally taxed on an accrual basis, unless specifically opted for cash basis taxation, and banks typically deduct TDS at 10% on the interest. “There is no TDS on mutual funds, provided the income from redemption is considered as capital gains and not business income,” he emphasized, highlighting another operational advantage in favor of mutual funds.
What could unlock the next level
For this model to scale, regulatory and market support must fall into place.
Abhishek Kumar, a Sebi-registered investment advisor and founder of SahajMoney, said Curie and similar platforms are acting as market makers by providing liquidity through liquid funds. But to grow, they’ll need wider AMC partnerships (Curie currently lists only one on its website) and more bank integrations to enhance user choice.
But the biggest barrier may not be technology—it’s psychology.
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Girish Ganaraj, a certified financial planner, a Sebi-registered investment advisor, and founder of Finwise Financial Planners & Advisors, said retail investors still associate mutual funds with long-term, equity-linked investments. In contrast, savings accounts and FDs are perceived as “my money in my account”—immediate and accessible. That perception gap makes users hesitant to treat mutual fund units as readily spendable cash, even when the product allows it.
Vishal Dhawan, another Sebi-registered investment advisor and founder of Plan Ahead Advisors, echoed this view. “Mutual funds continue to be perceived as instruments for equity market exposure,” he said, pointing out that few investors are aware of their short-term liquidity potential. That disconnect is one of the key challenges preventing the widespread adoption of instant redemption features.
According to Ganaraj, UPI could be the killer hook. By linking mutual funds directly to UPI payments, fintechs eliminate the friction typically associated with fund withdrawals. That could help reframe liquid mutual funds as viable, even superior, alternatives to savings accounts and sweep-out FDs—especially given their lower costs and better tax efficiency.
The stakes are high: more than ₹84 trillion is currently parked in savings and current accounts. Even a modest shift from this pool into mutual funds would mark a dramatic expansion of the retail investor base.
For now, though, scale remains limited. The ₹50,000 per AMC redemption cap means fintechs must partner with multiple fund houses to enable meaningful transaction volumes. Curie can expand its tie-ups to offer users more flexibility, potentially enabling instant redemptions of ₹2–3 lakh with just five to six AMCs.
The technical risks have already been evaluated. When Sebi first allowed instant redemptions, it required AMCs to maintain cash buffers to meet sudden outflows—ensuring liquidity in most scenarios.
Looking ahead, the opportunity could grow dramatically if Sebi raises instant redemption limits or extends the facility to other fund categories—such as money market or arbitrage funds, particularly those taxed as equity. That would significantly boost the tax efficiency of mutual funds compared to savings accounts.
Under the new tax regime, deductions under Sections 80TTA and 80TTB—on savings account interest—are no longer available, and such interest is taxed at slab rates. In contrast, arbitrage or equity-oriented funds enjoy preferential tax treatment, especially when held for over a year. If regulators act on this, mutual funds could become an even more compelling alternative.
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Ganaraj believes the redemption cap should be raised to ₹5 lakh to make this a truly viable replacement for traditional cash savings.
The vision is bold: a digital savings account powered not by banks, but by mutual funds. Whether it takes off will depend on how fast regulators move—and how willing investors are to rethink what “money in the bank” really means.