Are instant-redemption liquid funds better than savings accounts or sweep-in FDs?

livemint.com:

Markets regulator Sebi issued a circular on instant redemption in liquid funds in 2017, allowing investors to withdraw up to ₹50,000 or 90% of the money parked in a liquid fund per day, whichever is lower. Many fund houses such as PPFAS, Nippon, Shriram, Bajaj, ICICI, HDFC and SBI offer this facility. 

Liquid mutual funds with instant redemption may seem like a good alternative to traditional savings accounts and sweep-in fixed deposits (FDs) as they offer higher returns. But are they really better? Let’s find out.

The instant redemption feature allows investors to withdraw money from liquid funds instantly, typically through the asset management company’s website. Sandeep Agarwal, head of fixed income at Sundaram Mutual clarified, «Instant redemption is only available to resident Indians. Investors can withdraw up to ₹50,000 or 90% of the investment in the scheme per day, whichever is lower. The payouts are processed instantly via IMPS, and the facility is available 24x7 on all days.»

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“For redemption requests placed before the 3 pm, the previous day's NAV or the current day's NAV applies, whichever is lower. For requests placed after 3 pm, the same day's NAV or the next day's NAV applies, whichever is lower," he added. However, It is important to note that non-instant redemptions are processed on the usual T+1 basis. 

While sweep-in FDs add surplus funds in your savings account to fixed deposits automatically, liquid fund redemption requires manual intervention. The sweep-in feature is controlled by the bank, which knows your bank balance. Liquid funds, on the other hand, require self-service.

Liquid funds do offer superior