LIC MF Money Market Fund: Get higher yields on your idle funds

Many investors have substantial amounts in their savings bank account. Some investors may have parked sums in their savings bank for a large expense coming up after a few months. Some investors may not simply have decided what do with their savings after paying for their regular expenses. Over a period of time these surplus funds can accumulate to a substantial amount for which the investor gets very low return. Savings bank interest rate for major scheduled commercial banks are usually lower than floating rate fixed tenure instruments and currently ~2.5% P.A. (source: RBI, as of 15^th July 2026). In this article we will discuss, how LIC MF Money Market Fund, a highly liquid investment option can give you higher yields even for short term investments compared to savings bank interest.

Interest rate scenario

In May 2025, RBI cut the repo rate from 6% to 5.5%. In November 2025, RBI again cut the repo rate to 5.25%. Since then, Reserve Bank of India (RBI) kept the repo rate unchanged at 5.25% which was also reinstated in the August 2026 MPC meeting. The current MPC’s stance in neutral, which means that the central bank is carefully balance growth and inflation. As per Ministry of Statistics and Program Implementation, the CPI inflation rate was 4.45%, which was above the RBI’s CPI inflation target of 4%, but within its tolerance band of +/- 2%. Given the current conditions, RBI is unlikely to hike interest rates if CPI inflation remains within the tolerance band. In August 2026 MPC meeting, the RBI also noted that GDP growth estimates was above expectations and reiterated its neutral policy stand. In other words, we can expect RBI to hold at the repo rate at 5.25% in the coming months.

Yield scenario

1 year G-Sec yields have remained in the range of 5.4% to 5.8% over the last 12 months. Yields briefly surged above 6% when ceasefire between US and Iran broken and crude prices shot up but have again come down below 5.8%.

Source: Investing.com. Period: 31^st July 2025 to 31^st July 2026

Liquid, Ultra Short Duration and Money Market Fund return over the years

Mutual funds provide highly liquid and relatively low risk investment options which can generate returns on your idle funds (see the chart below). In this article, we will discuss money market funds with spotlight on LIC MF Money Market Fund.

Source: Advisorkhoj Research, as on 12^th August 2026

What are money market funds?

Money market funds are debt mutual fund schemes which invest in money market instruments like commercial papers (CPs), certificates of deposits (CDs), Treasury Bills (T-Bills), Tri Party Repos (TREPs) etc, with maturities of less than one year. As per AMFI August 2026 data, money market funds as a category, has the second highest assets under management (AUM) among all debt fund categories. While money market funds are popular among corporates and institutional investors for their working capital and cash management needs, there is relatively low awareness about these funds among retail investors.

Characteristics of money market instruments

• Liquidity: Since these instruments mature within 1 year, they are highly liquid.


• Interest rate risk: Interest rate risk is directly related to the duration of debt or money market instruments. Since these instruments have very short durations (1day to 1 year), the impact of interest rate / yield changes on Net Asset Value (NAV) is low, in other words, low interest rate risk.


• Credit risk: T-Bills are government securities and hence have no credit risks. TREPs (overnight securities) are backed by G-Secs and therefore have practically no credit risk. CPs and CDs may have credit risks.

About LIC MF Money Market Fund

LIC Mutual Fund is renowned in the mutual fund industry for their long track record and expertise in fixed income investments. LIC MF Money Market Fund was launched in August 2022.

• The fund will invest in money market securities with maturity of up to 1 year


• The fund is an actively managed fund which will adopt an investment strategy depending on the interest rate scenario


• The fund proposes to invest in high quality credits


• The maturity profile of instruments will be selected in line with the market outlook

Performance over 1 year investment tenures

The chart below shows the 1 year rolling returns of LIC MF Money Market Fund since in the inception of the scheme. The fund never gave negative returns (capital preservation). The median 1 year rolling of the fund was 6.38% (comparable to 1 year FD interest rates).

Source: Advisorkhoj Research, as on 31^st July 2026

Outperformed the category average over the last 1 year

Source: Advisorkhoj Research, as on 12^th August 2026.

High credit quality

The credit quality of the fund is very high. Almost 100% of the underlying portfolio is AAA or Sovereign and cash or cash equivalent.

Source: Advisorkhoj Research, LIC MF Factsheet, as on 31^st July 2026.

Who can invest in LIC MF Money Market Fund?

• Investors looking for reasonable returns with investment in high credit quality credits


• Investors looking for short term investment


• Investors seeking lower interest rate risk


• Suitable investment option for investors looking for a low risk fund for STP to a LIC MF equity fund


• Investors with an investment horizon of up to 1 year

Investors should consult with financial advisors or mutual fund distributors if LIC MF Money Market Fund is suitable for their investment needs.