First, select sauté on the Instant Pot and adjust to normal. Next, add oil to the pot. When the oil is hot, add in potatoes to the pot and let them sauté for 2 minutes until they are slightly golden. Turn them after the 2 minute mark when they are golden brown. Sauté them for another two minutes on the other side.
When 4 minutes of sautéing are up move the potatoes to the side and add in asafoetida, cumin seeds, cloves, bay leaf, black cardamom pods, green cardamom pods, and cinnamon stick. Stir and let it sauté for a few minutes until the cumin seeds splutter.
Then add ground turmeric, Kashmiri chili powder, ground ginger, ground fennel, ground cumin, salt and 1/4 cup water. Again, give it a good stir.
Furthermore, add whipped yogurt and stir well. Let it sauté for a minute.
Next, add paneer, 3/4 cup water, and stir gently without breaking the paneer. Also, make sure the spices coat the paneer well. Press cancel.
Once all the ingredients are in, seal the pot and select manual/high pressure for 3 minutes.
Finally, when cooking is complete, use quick pressure release to depressurize. Transfer to a serving bowl, discard the bay leaf and serve over steamed rice.