Now investors will be able to make UPI payments directly from their liquid mutual funds. ICICI Prudential Mutual Fund and Bajaj Finserv AMC, in collaboration with Curie Money, have launched the “Pay with Mutual Fund” feature. This allows investors to instantly redeem units from their funds to make payments, offering better returns and easier liquidity compared to a savings account.
Mutual Fund: A significant innovation has occurred in digital payments for investors. Now, they can make payments directly via UPI from their liquid mutual funds. ICICI Prudential Mutual Fund and Bajaj Finserv AMC, in partnership with Curie Money, have launched the “Pay with Mutual Fund” feature. This facility allows investors to instantly redeem units from their funds, and the payment is completed in real-time. This feature enables liquid funds to be used like a bank account, but with better returns and flexible cash management.
What is the new Pay with Mutual Fund feature?
Under this feature, investors can make payments directly via UPI using the money held in their liquid mutual funds. When an investor makes a payment, units equivalent to that amount are instantly redeemed (sold), and the money is transferred directly.
This facility has currently been launched by ICICI Prudential Mutual Fund and Bajaj Finserv AMC in collaboration with Curie Money. Its objective is to enable liquid funds to be used not just as an investment tool but also for everyday payments. It's like your liquid fund has become a digital bank account, where your money is not only secure but also earns better returns.
How it works
If you have investments in a liquid mutual fund and your fund house supports this service, you can link it with your UPI. When you make a payment at a shop or online, the payment amount will be automatically deducted from your fund. This process is completed in just a few seconds, and the money reaches the recipient's account instantly.
Why this feature is special
- Instant Liquidity Facility
Liquid funds already invest in short-term money market instruments, from which money can be easily withdrawn. But now it has become even easier. Earlier, investors had to withdraw money and transfer it to a bank; now, payments can be made directly.
- Better Returns than a Savings Account
While savings accounts typically offer interest rates of 3 to 4 percent, liquid funds can provide returns of 6 to 7 percent. This means better earnings on your money, now coupled with payment convenience.
- Easy and Familiar UPI Interface
Today, everyone makes payments via UPI. With this feature, mutual funds can now be used in the same easy way. No hassle of a separate app or bank transfer. Payments will be as simple as those made from a bank account.
- Flexible Cash Management
This facility can benefit not only individual investors but also businesses. Companies can keep their short-term funds in liquid funds and use them instantly when needed. This ensures that money continues to earn interest while providing flexibility for payments when required.
Is this option better than a savings account?
While this feature is superior to a savings account in many respects, there are also some differences. A savings account is completely secure, and deposits up to ₹5 lakh are insured. Liquid funds, however, are linked to the market, so they may carry some degree of risk.
If an individual seeks a completely secure option, a savings account is suitable for them. However, for investors who desire better returns in exchange for a little market fluctuation, this feature can be appealing. It prevents your money from remaining idle and instead gives it an opportunity to grow.
Points to keep in mind
Before investing in liquid funds, it's crucial to understand their average returns and redemption process. The performance of each fund can vary, and the fund houses involved in the payment process are currently limited. From a tax perspective, liquid funds are treated similarly to bank deposits, meaning you pay tax on the profit you earn in that financial year.
Furthermore, do not consider this a complete substitute for an emergency fund. While this feature is useful for everyday payments, it is always better to keep some amount in a savings account to ensure immediate cash availability during emergencies.
