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Is investing in liquid funds better than MOD in SBI

Please suggest keeping money in savings bank account with MOD (Multi Option Deposit in case of SBI) mode is better than the liquid fund or not. What is the major deference?

Dec 19, 2016 by Basudev, Barbil  |   Mutual Fund

SBI Multi Option Deposit Scheme (MODS) are Term Deposits linked to the Savings or Current Account of the individuals. Unlike Term Deposits which can be fully liquidated anytime you need funds; you can withdraw from a MODS account in multiples of Rs. 1,000 or more as and when you need the funds. The balance amount in your MODS account continues to earn the Term Deposit interest rates applicable at the time of initial deposit even though you have withdrawn a part of it now.

Therefore, you can say that convenience of MOD works more or less like liquid funds. The only difference is, when you are investing in a liquid fund, you need not define a time period as these are open ended funds and also that returns from liquid funds are not assured.

The MOD interest rates are same as that of Term Deposits -

7-45 days - 5.50%

46-179 days - 6.50%

180-210 days - 6.75%

211 days to less than 1 year - 7.00%

1 year to 455 days - 6.90%

Top performing liquid funds have given 7.50% - 8% return in the last one year. Please check the returns from here https://www.advisorkhoj.com/mutual-funds...

As you can see above, liquid funds are better alternative than MODs. Please also note that, interest on MODs are taxable and TDS is done beyond the threshold limit, whereas no TDS is done in liquid funds in the case of resident individuals and the gains are treated as short term capital gains.

Hope the above helps! Thanks for writing to Advisorkhoj : )

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