Select sauté on the instant pot and adjust to normal. Next, add 2 tbsp oil to the pot.
When the oil is hot, add asafoetida, cumin seeds, cloves, bay leaf, black cardamom pods, green cardamom pods, and cinnamon stick. Stir and let it saute for a few minutes.
Add ground turmeric, Kashmiri chili powder, ground ginger, ground fennel, ground cumin, salt and 1/4 cup water. Again, give it a good stir.
Add whipped yogurt and stir well. Let it saute for a minute.
Add paneer, 1/2 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 2 minutes. Finally, when cooking is complete, use quick pressure release to depressurize. Discard the bay leaf.
Transfer the cooked dish in a serving bowl and serve over steamed rice.