What does ₹4 lakh emergency fund earn in sweep-in vs liquid MF vs FD ladder over a year?
Scenario
30%-slab investor, ₹4 lakh emergency fund, comparing three parking architectures over 12 months in FY 2026-27
Inputs
- Slab %
- 30
- Fund size INR
- 4,00,000
- Horizon months
- 12
Calculation
- 1.
Pure savings account (3.5% pre-tax)
₹4L × 3.5% → ₹14,000
- 2.
Sweep-in savings (6% effective pre-tax)
₹4L × 6% → ₹24,000
- 3.
Liquid mutual fund (6.5% pre-tax)
₹4L × 6.5% → ₹26,000
- 4.
3-month FD ladder at small finance bank (7.5%)
₹4L × 7.5% → ₹30,000
Conclusion
FD ladder yields ~₹11K/year more than plain savings account on the same ₹4L buffer — small but real. Liquid MF sits in between with T+1 liquidity. Choose by access urgency, not just yield: never break a long FD for an emergency that could have been covered by liquid MF.
Tradeoffs
All three appropriate options (sweep, liquid MF, FD ladder) deliver 5-7% pre-tax — the differences are 1-2 percentage points. The dominant decision is NOT choosing equity for the buffer; the choice between the three liquid options is a tier-2 optimisation worth doing but not stressing over.