As Savings Bank Accounts have limits on the number transactions per day or per month, and also have a limit on the amount per transaction, people like businessmen, who need to do large transactions frequently, open Current Accounts to facilitate the transactions. However, unlike a Savings Bank Account, the balance lying in the credit of a Current Account doesn’t fetch any interest, rather generally account holders need to pay fees and charges for availing the Current Account facility.
Despite the fact that no interest is offered on Current Accounts, account holders generally keep a large amount of money in it, so that they don’t miss the opportunities to make quick investments due to transaction-related restrictions.
As a result, such people miss on the opportunities of getting return on such money that lay idle in the Current Accounts for uncertain period, which is also known as opportunity cost. Longer the period of keeping money idle in Current Account, more will be the opportunity cost.
If large amount is lying idle in your Current Account and you are not sure after how many days or months you would need to withdraw or transfer it, you may take advantage of Liquid Funds or Overnight Funds offered by Asset Management Companies (AMCs).
Liquid and Overnight Funds come under Debt Mutual Funds (MFs) that AMCs offer along with Equity MFs. Debt MFs invest money in debt instruments of various duration that earn fixed return. Overnight Funds invest in debt papers with shortest duration, followed by Liquid Funds.
As Overnight Funds have come into existence much later, Liquid Funds gained immense popularity over the years due to excellent liquidity, determination of NAV and liquidation facility 7 days a week and transfer of money in the account of the investors very next day, provided the redemption requests are submitted till 3 pm and the next day is a working day for banks.
So, if you put request to redeem your Overnight or Liquid Fund units on Sunday, the amount would get credited to your bank account on Monday, unless the bank is closed on that day.
Moreover, currently such funds are generating 7-8 per cent return per annum, which is much more than even interests in Savings Bank Account and even more than most Fixed Deposits (FDs), and you would get the benefit if large amount is invested even for short periods.
So, forget about nil interest, you may earn even more than interest earned in your Savings Bank Account or your Bank FDs, by investing your money, which is lying idle in your Current Account, in Overnight or Liquid Funds.