Best Large Cap Mutual Funds

Banking and PSU Debt Funds

Get the best out of debt instruments from the Banking & PSU sector via its curated and expert-formulated list of Best Banking and PSU Mutual Funds in India to invest for 2024.

Why Invest in Banking and PSU Debt Funds?

  • Stability : High-quality instruments from banks and PSUs ensure financial security and low default risk
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Invest in Best Banking and PSU Debt Funds in India for 2026

Explore the list of top-performing best banking and psu debt funds schemes curated by our experts

Kotak Banking and PSU Debt Fund - Growth

  • Returns
    6.2%
  • Lock-In
    No Lock in
  • Min Investment
    ₹ 100
  • Choice Rating

UTI Banking & PSU Fund Growth

  • Returns
    7.2%
  • Lock-In
    No Lock in
  • Min Investment
    ₹ 500
  • Choice Rating

Franklin India Banking & PSU Debt Fund Growth

  • Returns
    6.1%
  • Lock-In
    No Lock in
  • Min Investment
    ₹ 5000
  • Choice Rating

HDFC Banking and PSU Debt Fund - Growth

  • Returns
    6.0%
  • Lock-In
    No Lock in
  • Min Investment
    ₹ 100
  • Choice Rating

ICICI Prudential Banking and PSU Debt Fund Growth

  • Returns
    6.4%
  • Lock-In
    No Lock in
  • Min Investment
    ₹ 500
  • Choice Rating

You would have got

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Total Investment
₹ 1200
Expected Returns
₹ 37
Total Value
₹ 1237

Past performance doesn’t assure future results; actual outcome may vary due to market dynamics.

Your Investment Amount
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per annum

Understanding Banking and PSU Debt Funds

How Do Banking and PSU Debt Funds Work?

Banking and PSU Debt Funds pool money from multiple investors to invest primarily in debt instruments issued by banks, Public Sector Undertakings (PSUs), and related entities. These funds focus on high-quality, fixed-income securities, offering stable returns and lower credit risk.

The strategy of these mutual funds ensures a relatively secure investment avenue while maintaining reasonable growth potential. By allocating a significant portion of assets to bonds and debentures issued by trusted institutions, they aim to provide consistent income to investors.

Banking and PSU Funds FAQs

These funds primarily invest in bonds, debentures, and other fixed-income securities issued by banks, PSUs, and other government-backed entities.

The minimum investment amount varies by fund, but it typically starts from as low as ₹ 500 for SIPs or @rs 1,000 for lump sum investments.

Rising interest rates may negatively impact the returns of these funds as bond prices tend to fall when interest rates go up.

Yes, dividends are taxed at the applicable income tax slab rate in the hands of the investor as per current regulations.

The expense ratios for these funds are generally low, averaging between 0.3% and 1% of the fund's assets, depending on the AMC.

These funds typically invest in high-rated securities, such as AAA or AA bonds, ensuring lower credit risk.

Although rare, if a PSU or bank defaults, the fund’s returns may be adversely affected. However, the high credit ratings of these entities minimise this risk.

Yes, these funds can be suitable for retirees looking for stable returns and lower risk compared to equity funds.

No, these funds do not guarantee returns as they are subject to market risks and changes in interest rates.

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