CRISIL Liquid Fund Index
The CRISIL Liquid Fund Index is a money market benchmark published by CRISIL Research (a division of CRISIL Limited, majority-owned by S&P Global) that represents the return profile of a portfolio of investment-grade money market instruments with residual maturities up to 91 days. As the standard performance benchmark for liquid mutual fund schemes in India, it is the reference index for the single largest category of debt mutual fund by assets under management, tracking instruments that are the closest domestic equivalent to cash.
Publisher
CRISIL Limited is India’s leading credit rating and analytical services company, established in 1987. Its research arm, CRISIL Research, maintains the CRISIL fixed income index family – including the Liquid Fund Index – which has been the authoritative source of debt benchmarks for the Indian mutual fund industry for over two decades.
Instrument composition
The CRISIL Liquid Fund Index is constructed from a basket of short-dated, high-quality instruments reflecting the actual investable universe of Indian liquid funds:
| Instrument type | Eligibility criteria |
|---|---|
| Treasury bills (T-bills) | Central government; residual maturity up to 91 days |
| Commercial paper (CP) | Minimum credit rating A1+; residual maturity up to 91 days |
| Certificates of deposit (CD) | Issued by scheduled commercial banks; minimum rating A1+; maturity up to 91 days |
| Collateralised borrowing and lending obligations (CBLO) | Overnight to 91 days |
| Repo and reverse repo | Backed by government securities; overnight to 91 days |
SEBI’s regulations for liquid mutual funds restrict holdings to instruments with residual maturities not exceeding 91 days, and the index mirrors this constraint. The benchmark therefore does not include corporate bonds, longer-dated government securities, or instruments below A1+ in credit quality.
Methodology
- Index type: Total return (price + accrual), computed daily.
- Valuation: Instruments are marked to market using FIMMDA/NDS-OM data and matrix pricing for less frequently traded instruments.
- Rebalancing: Monthly rebalancing to reflect the prevailing money market universe.
- Duration: Very short; the weighted average maturity of the portfolio is typically 30-60 days, resulting in a modified duration of 0.08-0.16 years. This implies negligible interest rate risk.
- Credit risk: The index is constructed to reflect the low credit risk profile of liquid funds; all included instruments carry the highest short-term ratings.
Interest rate sensitivity and yield dynamics
Because the CRISIL Liquid Fund Index holds instruments maturing within 91 days, its return is closely tied to prevailing short-term interest rates (the overnight repo rate set by the Reserve Bank of India and the 91-day T-bill yield). Key characteristics:
- Minimal mark-to-market volatility: with durations below 0.2 years, even a 100 basis point rate change moves the index by less than 0.2%. Returns are almost entirely driven by coupon/accrual income, not price appreciation.
- Monotonically rising: because accrual income is always positive, the CRISIL Liquid Fund Index has historically risen every single day, making it a near-riskless benchmark in Indian debt markets.
- Rate transmission: when the RBI cuts the repo rate, liquid fund yields fall within days as maturing instruments are reinvested at lower rates; when the RBI hikes, yields rise quickly. This makes liquid funds a relatively accurate proxy for the current RBI rate cycle position.
Historical returns
| Period | Approximate CRISIL Liquid Fund Index CAGR |
|---|---|
| 1-year (FY2024-25) | 6.5-7.5% |
| 3-year CAGR (2022-25) | 5.5-7.0% |
| 5-year CAGR (2020-25) | 4.5-6.0% |
| 10-year CAGR (2015-25) | 6.0-7.0% |
Returns closely track the RBI repo rate cycle. The anomalously low returns during 2020-22 reflect the Covid-era rate cuts (repo rate at 4.0%) and the subsequent gradual tightening. Post-2023 returns have recovered to the 6.5-7.5% range as the repo rate stabilised above 6%.
Mutual fund schemes and usage context
Every SEBI-categorised liquid mutual fund scheme in India uses the CRISIL Liquid Fund Index as its mandated performance benchmark. The liquid fund category is the most popular among:
- Corporates parking short-term treasury surpluses.
- Retail investors using liquid funds as a cash-management alternative to savings accounts.
- Systematic Transfer Plans (STPs): investors park funds in liquid schemes before systematic transfer to equity schemes.
- Institutional investors managing short-duration cash pools.
Major liquid funds benchmarked to this index include SBI Liquid Fund, HDFC Liquid Fund, ICICI Prudential Liquid Fund, Aditya Birla Sun Life Liquid Fund, UTI Liquid Cash Plan, and others. As of 2024-25, the liquid fund category collectively manages AUM of Rs 7-9 lakh crore.
Tax treatment context
Returns from liquid funds held for less than three years are taxed as short-term capital gains (added to income and taxed at the investor’s slab rate). For holding periods exceeding three years, long-term capital gains tax applies. Following the Finance Act 2023, the indexation benefit was removed for debt mutual funds purchased after 31 March 2023, making the tax treatment of liquid funds comparable to bank fixed deposits for new investments.
See also
- CRISIL Composite Bond Fund Index
- CRISIL Short-Term Bond Fund Index
- CRISIL Ultra Short-Term Bond Fund Index
- Mutual fund
- AMFI
References
- CRISIL Research. “CRISIL Fixed Income Indices Methodology.” crisil.com. Accessed 2026.
- SEBI. “Categorisation and Rationalisation of Mutual Fund Schemes – debt categories.” Circular SEBI/HO/IMD/DF3/CIR/P/2017/114, dated 6 October 2017.
- SEBI. Circular on liquid fund investments, SEBI/HO/IMD/DF2/CIR/P/2019/101.
- AMFI. “Liquid fund AUM and benchmark data.” amfiindia.com. 2025.
- Reserve Bank of India. “Monetary policy framework and repo rate.” rbi.org.in. 2025.