FD vs Money Market vs Treasury Bills vs Unit Trusts in Sri Lanka: Where Should You Keep Short-Term Savings?

You have Rs. 1 million that you probably won’t need immediately. Where should you keep it?

A fixed deposit?

A bank money market account?

Treasury Bills?

Or a unit trust?

At first, this looks like a simple question: choose whichever offers the highest interest rate.

But that can be the wrong approach.

A 10% fixed deposit, a 9.95% Treasury Bill and an 8.65% money-market unit trust aren’t directly interchangeable.

They have different:

• Risks
• Tax treatment
• Access to money
• Minimum investments
• Return structures
• Early-withdrawal consequences
• Regulatory protections

And the right place for money you need next month may be completely different from money you’ll need one year from now.

Let’s compare the main short-term savings options available to Sri Lankan investors in 2026.

Quick Comparison

For this article, we’ll treat “short term” mainly as money you expect to use within approximately the next 12 months.

Feature	Fixed Deposit	Bank Money Market Account	Treasury Bill	Money-Market Unit Trust
Return	Usually fixed for term	Variable	Market yield locked when purchased if held to maturity	Variable
Access	Usually possible, but early withdrawal affects return	Generally flexible	Can sell before maturity, but price can change	Usually redeemable subject to fund rules
Typical period	1 month–several years	Open-ended	91, 182 or 364 days	Open-ended
Capital certainty	Deposit subject to institution risk	Deposit subject to institution risk	Government repayment if held to maturity	NAV/investment risk exists
Deposit insurance	Eligible deposits up to applicable limit	Usually yes if structured as eligible bank deposit	No — not a bank deposit	No
Minimum amount	Usually relatively low	Can be Rs.100k–Rs.1m+ for attractive tiers	Rs.5m minimum in primary auction; smaller secondary-market access possible	Often Rs.1,000–10,000+
Best feature	Predictable return	Liquidity	Sovereign security + known maturity	Flexibility + low entry amount
Main weakness	Money is effectively locked for best return	Rate can change / threshold can matter	More complex; tax isn’t automatically deducted	Return isn’t guaranteed

This is a simplified comparison.

The exact conditions depend on the bank, fund, dealer and product you choose.

First: “Money Market Account” and “Money Market Unit Trust” Are NOT the Same

This causes a lot of confusion in Sri Lanka.

Bank Money Market Account

A bank money market account is generally a bank deposit product.

For example, NDB, Commercial Bank, DFCC, Sampath and several other banks offer money-market savings accounts.

Your money remains a deposit with the bank.

Read Peak Lanka’s detailed comparison:

Money Market Accounts in Sri Lanka (2026): Compare Bank Rates, Minimum Deposits & Returns

Money-Market Unit Trust

A money-market unit trust is an investment fund.

Your money is pooled with other investors’ money and invested according to the fund mandate.

Depending on the fund, underlying investments may include:

• Treasury Bills
• Government securities
• Fixed deposits
• Bank deposits
• Repurchase agreements
• Commercial paper
• Other short-term debt instruments

The Securities and Exchange Commission of Sri Lanka regulates unit trusts and requires the managing company and trustee structure to meet applicable requirements.

But an investment in a unit trust is not the same as keeping money in a savings account.

Keep that distinction in mind throughout this comparison.

Current 2026 Returns: A Useful Snapshot

Interest rates change frequently, so the following figures shouldn’t be treated as permanent rates.

They simply show what different products were offering around September–October 2026.

Product	Recent Published Figure	Reference Date
3-month DFCC FD	10.00%	1 Sep 2026
6-month DFCC FD	10.00%	1 Sep 2026
1-year DFCC FD	10.50%	1 Sep 2026
NDB Money Market Savings – Rs.1m+	7.50%	24 Aug 2026
91-day Treasury Bill	9.30%	19 Oct 2026
182-day Treasury Bill	9.44%	19 Oct 2026
364-day Treasury Bill	9.95%	19 Oct 2026
NDB Wealth Money Fund	8.65%*	10 Sep 2026
NDB Wealth Money Plus Fund	8.25%*	10 Sep 2026

*Unit-trust yields are variable and shouldn’t be interpreted as a guaranteed return for the next year.

These figures also aren’t perfectly comparable.

An FD rate can be fixed for the agreed term.

A money-market savings rate can change.

A Treasury Bill’s quoted yield is calculated differently from simple deposit interest.

A unit trust’s current or annualised yield reflects its portfolio and can change as market conditions change.

Never choose solely by looking for the biggest percentage in this table.

Option 1: Fixed Deposit

A fixed deposit is probably the easiest option to understand.

You deposit money with a bank or finance company for an agreed period, and the institution quotes an interest rate.

For example, DFCC’s published rates effective from 1 September 2026 included:

• 3 months: 10.00%
• 6 months: 10.00%
• 1 year: 10.50%

Check current rates directly because banks can change them for new deposits.

Why FDs Are Useful

The biggest advantage is certainty.

Suppose you open a six-month FD at an agreed fixed rate.

A change in market interest rates next month generally doesn’t alter the rate already agreed for that particular fixed deposit, subject to its contractual terms.

That makes an FD useful when you know:

“I need this money in six months.”

Examples could include:

• Wedding expenses
• Education payment
• Vehicle down payment
• House-related expense
• Planned business purchase

What Happens If You Need the Money Early?

Most institutions allow premature withdrawal under their terms.

But you may receive:

• Lower interest
• Savings-account interest instead of FD interest
• Another premature-withdrawal rate
• Less return than originally expected

So a fixed deposit isn’t genuinely “locked forever.”

But breaking it early can destroy much of the financial reason you selected the FD in the first place.

Deposit Insurance

Eligible fixed deposits at member institutions are covered by the Sri Lanka Deposit Insurance Scheme up to Rs. 1.1 million per depositor, per institution, subject to the scheme’s rules.

The limit applies across eligible deposits at the same institution rather than separately to every FD.

See the Central Bank’s Sri Lanka Deposit Insurance Scheme.

Tax on FD Interest

Since 1 April 2025, applicable Sri Lankan-source deposit interest is generally subject to 10% Advance Income Tax (AIT).

Certain resident individuals meeting the applicable income conditions may qualify for the IRD’s self-declaration process.

Importantly, the 10% deduction isn’t necessarily your final income-tax liability.

Read the IRD’s official circular on AIT on deposit interest.

You can estimate your return using Peak Lanka’s:

Sri Lanka Fixed Deposit Calculator – Interest, Maturity & WHT/AIT

Example: Rs. 1 Million in a One-Year FD

Suppose your bank offers:

Deposit: Rs. 1,000,000

Rate: 10.5%

Using a simple one-year maturity illustration:

Gross interest:

Rs. 105,000

If 10% AIT is deducted from the interest:

Rs. 10,500

Estimated cash interest after that deduction:

Rs. 94,500

Total:

Rs. 1,094,500

This is a simplified illustration.

The bank’s actual interest calculation, credit dates, compounding method and your final tax position may differ.

Option 2: Bank Money Market Account

A bank money-market savings account behaves more like a savings account than an FD.

Interest is commonly calculated daily and credited periodically, while your money generally remains accessible.

That makes it attractive for money that needs to remain reasonably liquid.

But there is a trap:

The attractive rate often depends on maintaining a minimum balance.

For example, NDB’s latest published schedule when researched for this article showed:

Below Rs. 1 million → 2.00%

Rs. 1 million and above → 7.50%

Imagine you deposit exactly Rs. 1 million.

Then an emergency occurs and you withdraw Rs. 100,000.

Your balance falls to Rs. 900,000.

You may now fall into a much lower interest tier.

That’s why a bank money-market account can be a poor design for an emergency fund if your balance sits exactly on the minimum threshold.

Main Advantages

• Money remains accessible.
• No fixed maturity date.
• Interest can be better than an ordinary savings account.
• Suitable for money awaiting another use.

Main Disadvantages

• Rates can change frequently.
• Attractive rates can require high balances.
• Withdrawing money can move you into a lower interest tier.
• Minimum-average-balance conditions may apply.

A full eight-bank comparison is available here:

Money Market Accounts in Sri Lanka

Example: Rs. 1 Million at 7.5%

If the rate remained 7.5% for an entire year:

Gross annual interest would be approximately:

Rs. 75,000

With a simple 10% AIT deduction on that interest:

Rs. 7,500

Approximate cash interest after the deduction:

Rs. 67,500

But unlike the FD example, you shouldn’t assume the rate will remain 7.5%.

Money-market account rates can change.

Option 3: Treasury Bills

Treasury Bills are short-term Government securities.

Sri Lanka issues standard Treasury Bills with maturities of:

• 91 days
• 182 days
• 364 days

They are generally issued at a discount and redeemed at face value when they mature.

The Central Bank describes Government securities as carrying the repayment guarantee of the fiscal authority and refers to them as default-risk-free instruments in the domestic context.

You can read the official CBSL Government Securities FAQ.

Current Treasury Bill Yields

On 30 September 2026, the primary-market weighted-average yields published by the Central Bank were:

Maturity	Yield
91 days	9.25%
182 days	9.41%
364 days	9.95%

These are market yields rather than permanently fixed rates available to every retail investor.

Future auctions may produce higher or lower yields.

How Do Treasury Bills Work?

Unlike a conventional FD, you normally purchase a Treasury Bill below its face value.

At maturity, the Government pays the face value.

The difference represents your return.

For example, you might purchase a security with a face value of Rs. 1 million for less than Rs. 1 million today.

At maturity, Rs. 1 million is repaid.

The actual purchase price depends on the market yield and remaining maturity.

That’s why you shouldn’t calculate T-Bill returns simply by multiplying:

Rs. 1 million × 9.95%

without considering how Treasury Bill pricing works.

Do You Need Rs. 5 Million to Buy Treasury Bills?

For participation in the primary auction, CBSL states a minimum investment of:

Rs. 5 million

with subsequent amounts in multiples of Rs. 1 million.

But retail investors can obtain Government securities through the secondary market via eligible banks or primary dealers, where the practical minimum offered to customers can differ.

Ask the institution:

• Minimum purchase
• Quoted yield
• Fees or margins
• Settlement process
• Custody arrangements

What If You Need Your Money Before the T-Bill Matures?

Treasury Bills can be traded in the secondary market.

But this introduces something FDs don’t usually have in the same form:

market-price risk.

Suppose interest rates rise after you buy your T-Bill.

The market value of your existing security can fall.

If you hold it until maturity, the face value is repaid according to the instrument’s terms.

If you need to sell early, the price you receive depends on the market at that time.

For genuinely short-term savings, one sensible approach is therefore to choose a maturity that roughly matches the date when you expect to need the money.

Important: Treasury Bill Tax Is Different From FD Tax

This is one area where people can easily make incorrect comparisons.

The Inland Revenue Department specifically clarified that interest or discount from Treasury Bills and Treasury Bonds is generally not subject to AIT or withholding tax.

That does not mean the income is generally tax-free for a resident individual.

The IRD states that, apart from specified exemptions, Treasury Bill and Treasury Bond interest or discounts must be included when calculating assessable income.

Because no AIT is withheld, there may be no automatic tax credit to offset the resulting liability.

Read the official:

IRD Notice – Income Tax Liability on Interest or Discount from Treasury Bills or Treasury Bonds

So don’t compare:

FD after 10% AIT

against:

Treasury Bill with no deduction

and assume the Treasury Bill income is tax-free.

Your overall tax position matters.

Option 4: Unit Trusts

This category needs the most care.

“Unit trust” doesn’t describe one level of risk.

Sri Lanka has different types of funds, including:

• Money-market funds
• Income funds
• Government-security funds
• Balanced funds
• Equity funds
• High-yield funds
• Shariah funds

An equity unit trust and a money-market unit trust are completely different investments.

For money you need within a few months, an equity fund normally doesn’t belong in this comparison.

Its value can fall substantially just when you need to withdraw.

For short-term savings, the more relevant products are generally:

money-market or other low-duration fixed-income unit trusts.

How a Money-Market Unit Trust Works

A money-market fund pools investors’ money and invests in short-term instruments.

For example, funds may hold combinations of:

• Treasury securities
• Bank fixed deposits
• Repo
• Commercial paper
• Securitised debt
• Other short-term fixed-income instruments

The exact portfolio varies by fund.

This is why you should read the fund’s:

• KIID
• Fact sheet
• Fees
• Portfolio allocation
• Credit quality
• Redemption conditions

before investing.

The Unit Trust Association of Sri Lanka publishes daily unit prices across funds.

Example: NDB Wealth Money Fund

NDB Wealth’s Money Fund was displaying a return/yield of 8.65% as at 10 September 2026.

It states:

Minimum investment: Rs. 10,000

Investment/withdrawal: Any time, subject to its procedures.

The fund invests in short-term Government securities and high-credit-quality bank deposits.

See:

NDB Wealth Money Fund

This demonstrates one attraction of unit trusts:

You may be able to access a diversified short-term investment portfolio with much less money than required for a high-tier bank money-market account or a primary Treasury auction.

But the 8.65% figure is not a fixed one-year promise.

The yield changes as the fund’s underlying portfolio changes.

Unit Trusts Don’t Have Bank Deposit Insurance

This distinction is important.

Sri Lanka’s Deposit Insurance Scheme covers eligible:

• Savings deposits
• Demand deposits
• Fixed deposits

at member institutions.

A unit trust isn’t one of those bank deposits.

Instead, unit trusts operate under SEC regulation with an approved managing company and trustee structure.

Regulation provides important investor protections.

It doesn’t turn the investment into a guaranteed bank deposit.

The NAV can change and the underlying assets still carry their own investment risks.

What About Unit Trust Tax?

Don’t rely on old internet articles saying:

“Unit trusts are completely tax-free.”

Tax rules have changed over time.

Current fund documentation should be checked.

For example, JB Vantage’s February 2026 money-market fund factsheet states that the resulting return for individual investors is subject to taxation at their marginal rate.

Different structures and types of income can have different tax treatment.

Therefore, before comparing a unit trust’s advertised yield with an FD’s after-AIT return, check:

• Current KIID/fact sheet
• Current tax rules
• Your personal tax circumstances

If the amount is significant, consult an appropriately qualified tax professional.

So Which One Is Safest?

“Safe” can mean several different things.

Lowest Default Risk

Treasury Bills have the strongest position in this comparison from a domestic credit-risk perspective because they are Government securities backed by the fiscal authority.

Deposit Protection

Eligible bank and finance-company deposits receive SLDIS protection up to Rs. 1.1 million per depositor, per institution.

That applies to qualifying FDs and savings deposits.

Lowest Price Volatility

An FD held to maturity has a predictable maturity value under its agreed terms.

A bank money-market account also doesn’t normally fluctuate in value like an investment fund, although its rate can change.

Unit Trust

A low-risk money-market fund may have relatively stable NAV behaviour, but it is still an investment product and not a guaranteed deposit.

Different products protect you from different risks.

Where Should You Keep an Emergency Fund?

Emergency money has a different job from ordinary short-term savings.

You need it because something unexpected has happened.

That means:

access matters more than chasing the final 1% of return.

Suppose your emergency fund is Rs. 1 million.

Putting all Rs. 1 million in a bank money-market account requiring exactly Rs. 1 million to earn its attractive rate creates a strange situation.

The moment you actually use the emergency fund, your balance drops and your interest rate may collapse.

Similarly, putting the entire fund in a fixed deposit creates inconvenience if you repeatedly need to break deposits.

A more practical emergency structure could use more than one layer.

For example:

Immediate-access portion

Ordinary savings account.

Secondary reserve

Suitable bank money-market account or highly liquid money-market fund.

Money unlikely to be required immediately

Short FD or another appropriate low-risk instrument.

This is only an illustrative structure; the correct amounts depend on the household.

Read:

How Much Emergency Savings Do You Need in Sri Lanka?

If You Need the Money in Three Months

Suppose you know you’ll need Rs. 1 million approximately three months from now.

Examples:

• Wedding payment
• Course fee
• Vehicle down payment
• Contractor payment

Your priority is avoiding a loss immediately before the payment date.

Options worth comparing include:

3-Month FD

Simple and predictable.

Match the maturity date to your planned expense.

91-Day Treasury Bill

Also naturally matches a roughly three-month horizon.

But make sure you understand purchase procedures and tax reporting.

Money-Market Unit Trust

Useful if the exact withdrawal date isn’t certain or you need more flexibility.

But the return remains variable.

Bank Money Market

Flexible, although the rate may be lower than a current 3-month FD and can depend on balance thresholds.

For a known three-month payment, the predictability of maturity can often matter more than daily liquidity.

If You Need the Money in Six Months

The same logic applies.

A six-month FD and a 182-day Treasury Bill align fairly closely with a six-month goal.

Current published examples show why comparing both can be useful.

DFCC’s recent six-month FD rate:

10.00%

30 September 182-day T-Bill primary yield:

9.41%

At first glance, the FD looks better.

But you still need to consider:

• Bank/institution risk
• Deposit insurance
• Tax
• Access before maturity
• Exact quotation available to you

There is no rule that says Treasury Bills must always offer more than bank FDs.

If You Need the Money in One Year

A 12-month horizon gives you several realistic options.

Current examples include:

One-year FD: 10.50%

364-day T-Bill: 9.95%

Money-market fund: variable

Bank money-market account: variable

If the date is fixed and you’re confident the money won’t be needed earlier, the fixed-rate products become more attractive because you can remove some uncertainty.

If you might need the money at any point during the year, liquidity becomes more valuable.

What If You Don’t Know When You’ll Need It?

This is where flexibility has real financial value.

Suppose you’re saving Rs. 2 million as a future house deposit.

You might buy in:

• 3 months
• 6 months
• 12 months

You don’t know.

A one-year FD offering a slightly higher return can create an awkward situation if you find the right property after four months.

This is where bank money-market accounts and short-term unit trusts can become more useful.

You may sacrifice some expected return in exchange for greater flexibility.

That isn’t necessarily “losing money.”

Liquidity itself has value.

A Practical Rs. 2 Million Example

Suppose you have Rs. 2 million of short-term savings.

One possible structure could be:

Rs. 300,000

Immediate-access savings.

Rs. 700,000

Flexible short-term investment or deposit.

Rs. 1 million

FD or Treasury instrument matched to a known future goal.

This isn’t a universal recommendation.

The example demonstrates the broader point:

You don’t necessarily need to choose only one product.

Different parts of your savings can have different jobs.

Don’t Chase 0.5% Without Doing the Maths

Suppose one option offers:

9.5%

and another offers:

10.0%

Difference:

0.5 percentage points

On Rs. 1 million for one year, that’s roughly Rs. 5,000 gross before considering different tax treatment and calculation methods.

Would you move money to an unfamiliar institution, accept worse liquidity or create extra complexity for Rs. 5,000?

Maybe.

Maybe not.

On Rs. 20 million, the same percentage difference is much more meaningful.

Always convert percentages into actual rupees.

Don’t Chase High Finance-Company FD Rates Without Checking the Institution

Licensed finance companies can sometimes offer higher FD rates than major banks.

That extra return exists for a reason.

Before placing money:

1. Confirm that the company is currently licensed by CBSL.
2. Check whether deposits are eligible under SLDIS.
3. Understand that deposit insurance covers only up to the applicable limit.
4. Don’t assume “CBSL-regulated” means CBSL guarantees your entire deposit.

CBSL explicitly advises depositors to exercise due care when placing money with financial institutions.

Check the current CBSL list of licensed finance companies.

Rs. 1.1 Million Deposit Insurance Does NOT Mean Each Account Gets Rs. 1.1 Million

Suppose you have at the same bank:

Savings account: Rs. 400,000

Money market account: Rs. 700,000

Fixed deposit: Rs. 1 million

Total eligible deposits:

Rs. 2.1 million

The deposit-insurance limit isn’t:

Rs. 1.1m × 3 accounts.

It is currently:

up to Rs. 1.1 million per depositor, per institution

subject to the scheme’s rules.

This matters once your cash holdings become larger.

Fixed Deposit vs Money Market: Which Is Better?

Choose based on the job of the money.

FD may make more sense if:

• You know exactly when you need the money.
• You want a fixed rate.
• You don’t expect to withdraw early.
• The offered return is attractive.

Bank Money Market may make more sense if:

• You need regular access.
• You can comfortably maintain the qualifying balance.
• You accept a variable rate.
• You prefer normal bank-account functionality.

Neither is universally better.

Treasury Bill vs Fixed Deposit

Treasury Bill may appeal if:

• You want direct Government-security exposure.
• Your goal matches a 91-, 182- or 364-day maturity.
• You understand the tax treatment.
• You have access through an appropriate dealer.

FD may appeal if:

• You want a simpler product.
• The bank is offering a competitive fixed rate.
• You prefer straightforward maturity proceeds.
• Deposit insurance protection matters for the amount involved.

Again, compare actual offers.

Unit Trust vs Money Market Bank Account

Money-market unit trust may appeal if:

• You have less than the bank’s high-rate minimum.
• You want a diversified short-term portfolio.
• You want relatively flexible redemptions.
• You’re comfortable with an investment rather than deposit structure.

Bank money-market account may appeal if:

• You want normal banking access.
• You can maintain the qualifying balance.
• You prefer a deposit product.
• SLDIS eligibility is important to you.

What I Would NOT Use for Short-Term Savings

Shares

Money required within a few months shouldn’t normally depend on whether the stock market happens to be up when you need it.

Equity Unit Trust

Same problem.

A unit trust can be well managed and still fall because its underlying shares fall.

Cryptocurrency

Price volatility makes it unsuitable for money that has a fixed short-term purpose.

Long-Duration Bond Fund

Even high-quality bonds can experience significant price changes when interest rates move.

An Unlicensed “Investment”

A promised 20% or 30% annual return doesn’t become safe because someone calls it a savings plan.

Verify the institution and product.

For money intended for long-term wealth creation rather than short-term spending, the answer changes considerably.

Peak Lanka’s article:

Why Fixed Deposits May Be a Poor Long-Term Investment Once You Have an Emergency Fund

explains why a product suitable for short-term capital protection may not be the best option for decades of wealth building.

A Simple Decision Table

Your Situation	Options Worth Comparing First
Need money at any moment	Savings / suitable money-market deposit
Emergency fund	Savings + liquid options
Need money in ~3 months	3-month FD / 91-day T-Bill / money-market fund
Need money in ~6 months	6-month FD / 182-day T-Bill
Need money in ~12 months	1-year FD / 364-day T-Bill
Date uncertain	Bank money market / money-market unit trust
Small amount below bank MM thresholds	Money-market unit trust / ordinary savings / FD
Long-term money for 10+ years	Don’t automatically treat this as short-term savings

This table is a starting point, not personalised investment advice.

Five Questions to Ask Before Choosing

1. When Exactly Will I Need the Money?

This is more important than asking which investment has the highest rate.

2. Can I Tolerate Any Fall in Value?

If the answer is no, be very careful about market-based investments.

3. What Happens If I Withdraw Early?

Check this before opening the product.

4. What Return Will I Receive After Tax and Fees?

Headline return isn’t necessarily your net return.

5. What Protection Actually Applies?

Understand the difference between:

• Deposit insurance
• Government securities
• SEC-regulated investments

They aren’t interchangeable guarantees.

Don’t Forget Inflation

Your savings can grow in rupee terms while still losing purchasing power.

For example, a 9% return during a period of 8% inflation provides much less real improvement than the headline rate suggests.

But this doesn’t mean short-term savings should automatically be moved into riskier assets.

The primary job of money needed next year is usually:

being available next year.

Maximising long-term real returns is a different financial objective.

So, Where Should You Keep Short-Term Savings in Sri Lanka?

There isn’t one winner.

Fixed deposits are useful when you know the date you’ll need the money and want a predictable return.

Bank money-market accounts provide greater flexibility but may have high balance thresholds and variable rates.

Treasury Bills provide direct short-term Government-security exposure with 91-, 182- and 364-day maturities, but purchasing and tax treatment are more complicated than an FD.

Money-market unit trusts can provide flexible access and relatively low minimum investments, but they’re investments rather than guaranteed bank deposits and their returns change.

For many people, the better solution isn’t choosing one product.

It’s matching each part of your savings to its purpose.

Keep money needed immediately accessible.

Match known future expenses to suitable maturities.

And don’t take unnecessary investment risk with money you’re going to need in a few months.

The highest return isn’t the best short-term investment if your money isn’t available when you actually need it.

If you had Rs. 1 million today that you expected to use within the next year, where would you keep it: an FD, bank money-market account, Treasury Bill or money-market unit trust?