Mutual funds allow you to gain inflation-beating returns and create a corpus to fulfill your long-term financial goals. However, many investors face one issue with mutual funds: they do not offer much liquidity. If you redeem your mutual funds within one year of purchasing them, you are charged an ‘exit load’, which may cut into your returns.

liquid funds

To solve this chaos faced by the investors, many asset management companies (AMCs) started offering instant redemption mutual funds. These funds provide greater liquidity to the investors than regular mutual funds.

What are instant redemption funds?

Usually, when you redeem your investments in a mutual fund, it takes two to three days for the amount to get credited to your bank account. However, some AMCs offer an instant redemption facility on a particular category of mutual funds provided by them.

The mutual funds that offer this facility to the investors are instant redemption funds. When you redeem these funds, the amount gets credited to your bank account almost instantly through the immediate payment service (IMPS) facility.

Due to the instant redemption mutual funds’ liquidity, many people have started considering them as an alternative to a savings bank account. Instead of keeping their idle money in a savings bank account, they park them in these funds in a quest to earn better returns.

How much amount can you withdraw from these funds?

As per the Securities and Exchange Board of India (SEBI) guidelines, you can withdraw up to Rs. 50,000 or 90% of your total investment value (whichever is lower) in a day under this facility. It means that if you have invested Rs. 50,000 in instant redemption funds, you can redeem a maximum amount of Rs. 45,000 in a day.

If you place the redemption request during market hours, it will be processed per the current Net Asset Value (NAV) of the units you are redeeming. However, if the bid is placed before or after the cut-off time, the same day’s NAV or the previous day’s NAV (whichever is lower) is considered.

Is there a penalty on the sudden redemption of these mutual funds?

Typically, no penalty is levied by the AMC if you choose to withdraw your money invested in the instant redemption mutual funds. However, you need to fulfill a few mandatory terms and conditions to redeem these funds.

Are liquid funds and instant redemption funds the same?

Not all liquid funds qualify as instant redemption funds. This facility is applicable only for a particular category of liquid funds. To be precise, only the “growth plans” under liquid mutual fund schemes offer this facility.


Instant redemption mutual funds provide you with enhanced liquidity on your investments, allowing you to use them for emergency purposes. However, before investing in these funds, you must thoroughly understand the risks associated with them.

You can start with a small SIP to invest in these plans and gradually increase your investment amount. Tata Capital Moneyfy app can make your investment journey hassle-free and straightforward.