Keeping your surplus funds locked in a savings account might not be the best use of your resources. While this preserves liquidity, your saved corpus also loses out on its ability to make money. Instead of keeping surplus locked in, you can consider various short-term investment instruments to make good returns. In this article, we discuss where you can park your idle cash and optimise your wealth creation potential.

• High-yield savings accounts, company FDs, and recurring accounts are safe investment instruments to park your idle cash.
• Liquid funds invest in short-term debt securities with a maturity of 91 days.
• Arbitrage funds are also good low-risk investment options for your idle cash.

If you have idle cash lying around in your account, you can consider the following investment options to invest the funds and earn returns:

1. High-yield savings accounts

High-yield savings accounts are offered by a few Indian banks where you can park your idle cash and earn better returns than regular savings accounts. High-yield accounts generally offer interest rates of around 5%-6%, which is considerably higher than regular accounts. While your idle cash earns steady returns until needed, you can withdraw from the account at any time to meet urgent requirements. You can compare banks offering such accounts and select the one with the most competitive interest rate.

2. Liquid funds

More and more retail investors are choosing liquid mutual funds to park their idle cash. Liquid funds primarily invest in highly liquid short-term instruments like treasury bills, CDs, and commercial papers that have a maturity duration of up to 91 days. As the name suggests, they are highly liquid. In fact, redemption requests for liquid funds are processed in a T+1 cycle. You should invest your idle cash in liquid funds if you want easy access to your funds but don’t wish to lose out on high interest earnings.

3. Company FDs

Company FDs are a popular investment option for your idle cash. Here, you deposit a lump-sum amount for a pre-given tenure and earn a fixed rate of interest on the same. Issued by reputed NBFCs, these fixed deposits offer much higher returns than regular bank FDs. Generally, company FD rates hover around 6%-10%, ensuring attractive returns on your idle funds. Companies with a high credit rating of [ICRA](Stable) AAA and CIRIL AAA/Stable ensure capital safety and guaranteed returns. Depending on your liquidity needs, you can choose from cumulative (interest paid out at maturity) and non-cumulative (periodic interest payouts) FDs. You can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.60% p.a.
 

4. Sweep-in FDs

You can leverage the sweep-in FD option to optimise returns on your idle cash. The sweep-in facility allows you to transfer surplus funds exceeding a specific threshold from your savings account into the linked FD account for a tenure of one year. The transferred funds earn returns at higher FD rates instead of sitting idle in your bank account. This allows you to enjoy easy liquidity without sacrificing high returns.

5. Recurring deposits

Recurring deposit accounts offer another prudent avenue to park your idle cash and earn good short-term returns. RDs allow you to deposit a fixed amount every month to earn returns at a fixed rate that’s higher than savings accounts. Premature withdrawals are also permitted against interest rate reductions. RDs are a prudent option to invest your idle cash if you have a more or less stable surplus every month. Disciplined investing in RDs helps you build a corpus over time.

6. Arbitrage funds

If you want to tap into market-linked returns without a high risk exposure, you can consider parking your idle cash in low-risk arbitrage funds that exploit price discrepancies in the market. Arbitrage funds operate on the mispricing of equity shares in the spot and futures market. In simple words, these funds take advantage of the price difference between the current and future securities to generate returns. The fund manager buys shares in the cash market and sells them in the futures/derivatives markets. The difference in cost price and selling price is the investor’s return.

If you’re looking for a smart way to put your idle cash to work, you can consider the top 6 investment options listed above. Instead of parking your idle cash in regular savings accounts or stashing it away in the locker, you can invest it in high-yield accounts, company FDs, and RDs. If you want market-linked returns without high risks, you can consider liquid and arbitrage funds. At the end of the day, where you park your idle cash will depend on your goals, return expectations, and liquidity requirements.