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Top Performing Banking and PSU Debt Mutual Funds To Invest In India (2022)

08 June 2022

The concept of Banking and PSU Debt Funds was established by SEBI. These funds are known as open-ended debt funds that are fundamentally invested in debt tools issued by banks and private sector ventures or initiatives and even though these funds are the healthiest ways to invest, their returns are heavily influenced by market conditions and economic circumstances.

Banking and PSU Funds are basically debt mutual funds in which approximately 80% of the corpus is invested in fixed-income securities called bonds, debentures, and bank deposits. The investment is typically made in debt security instruments with high liquidity and a short maturity period. This scheme associated with mutual funds chiefly requires investment in government-owned public sector banks.

As a result, such funds are comparatively safer and more secure than other private sector ventures. These schemes can be brief, medium, or ultra- brief-termed with lower risk than that of other debt funds, but this does not mean that they are entirely free of risks. 

Best Banking and PSU Debt Funds (2022)

S.No.

Fund Name

Type

1.  

Nippon India Banking & PSU Debt Fund (Direct-Growth)

Debt Banking & PSU

2.

IDFC PSU & Debt Fund (Direct-Growth)

Debt Banking & PSU

3. 

Axis Banking & PSU Debt (Direct-Plan-Growth)

Debt Banking & PSU

4.

Kotak Banking & PSU Debt Fund (Direct-Growth)

Debt Banking & PSU

5.

Aditya Birla Sun Life Banking & PSU Debt Fund (Direct-Growth)

Debt Banking & PSU

Factors to Consider Before Investing in Banking and PSU Debt Funds

Factors that you as an investor should consider while investing in Banking/PSU Debt Funds:

1. Monetary Goals

 For the best results, mutual fund investments must be coordinated with the investor’s complete monetary plans. Thus, prior to investing, it is essential to estimate the fund’s goal and ensure that it resonates with your individual financial objectives.

2. Performance of the Fund

Examining the performance of funds in various market circumstances and economic conditions will assist you in selecting a trustworthy fund. Though previous achievements and performance are no prediction of success and good results later on in time, a general yet important principle is to pick a fund that has performed well in both positive and negative market conditions.

 3. Fund Administration & Management

Stock choosing, distribution, and management are all influenced by asset management establishments and fund and investment managers. The fund will work profoundly and provide higher returns if the manager of the fund has the appropriate expertise and good experience. 

 4. Costs and Expenses

Investing in mutual funds has expenses, which can affect the final returns of your investment. Examine the expenses you’ll incur in terms of expense ratio, entry load, and exit load before investing in a fund.

 5. Additional Considerations

Before choosing a dependable PSU Mutual Fund, investors should consider a few additional factors such as the NAV value of the units, asset under management, investible corpus, and tenure.

India’s Top Banking and PSU Debt Funds Performance

  • Nippon India Banking & PSU Debt Fund (Direct-Growth)

Nippon India Banking & PSU Debt Fund (Direct-Growth) is a Nippon India Mutual Fund Debt Mutual Fund Scheme. The scheme aims to generate income over a short to medium time horizon by investing in debt and money maker instruments with varying maturities, primarily securities issued by banks, public sector undertakings (PSUs), and public financial institutions.

The 1-year direct growth returns on Nippon India Banking & PSU Debt Fund are 2.98 per cent. It has generated an average annual return of 7.94% since its inception.

  •  IDFC PSU & Debt Fund (Direct-Growth)

IDFC Banking & PSU Debt Fund (Direct-Growth) is a Debt Mutual Fund Scheme launched by IDFC Mutual Fund. The fund’s goal is to generate the best possible returns by investing in money market and debt instruments issued by regulated commercial banks.

The 1-year returns on the IDFC Banking & PSU Debt Fund Direct-Growth are 2.98%. It has returned an average of 8.00% per year since its inception. Every ten years, the fund has doubled the amount invested.

  • Axis Banking & PSU Debt (Direct-Plan-Growth)

Axis Banking & PSU Debt (Direct-Plan-Growth) is a Debt Mutual Fund Scheme launched by Axis Mutual Fund. The scheme invests primarily in debt and money market instruments issued by banks, public sector units, and public financial institutions in order to generate stable returns. The fund aims to provide investors with consistent returns and serves as a viable alternative to traditional fixed income and savings instruments.

Axis Banking & PSU Debt Direct Plan has a 1-year growth rate of 3.31%. It has returned an average of 8.09% per year since its inception. Every nine years, the fund has doubled the amount invested.

  •  Kotak Banking & PSU Debt Fund (Direct-Growth)

Kotak Banking & PSU Debt Fund (Direct-Growth) is a Debt Mutual Fund Scheme launched by Kotak Mahindra Mutual Fund. The scheme primarily invests in debt and money market securities issued by banks, public sector undertakings (PSUs), public financial institutions (PFIs), municipal bonds and reverse repo in such securities, sovereign issued by the Central and State Governments, and/or any security unconditionally guaranteed by the Government of India.

The 1-year returns on Kotak Banking and PSU Debt Fund Direct-Growth are 3.50%. It has returned an average of 8.37% per year since its inception. Every nine years, the fund has doubled the amount invested.

  •  Aditya Birla Sun Life Banking & PSU Debt Fund (Direct-Growth)

Aditya Birla Sun Life Banking & PSU Debt Fund (Direct-Growth) is a Debt Mutual Fund Scheme launched by Aditya Birla Sun Life Mutual Fund. This scheme primarily invests in debt and money market securities issued by banks, public sector undertakings (PSUs), and public financial institutions (PFIs) in India in order to generate reasonable returns.

Aditya Birla Sun Life Banking & PSU Debt Fund Direct-Growth returns are 3.31 per cent over the last year. It has returned an average of 8.78 per cent per year since its inception. Every nine years, the fund has doubled the amount invested.

Conclusion

SEBI has recently introduced PSU funds as a new type of mutual fund. These are typically Debt Funds that offer higher returns in a shorter time frame than traditional investments, allowing investors to quickly park their investable funds. Even though such funds may provide higher returns, they are still appealing. As a result, only invest in these if you have prior knowledge and sufficient information about equity funds. Equity funds are extremely vulnerable to price fluctuations and shocks.

People who are willing to digest information and take risks should invest in these stocks. If you want to invest in PSU Debt Funds, you can buy bonds or debentures in Highways, Food, Health, Education, and other sectors, but it’s still important to read the fine print and analyze how the market and prices work. The interest rates control the entire market, thus making it undoubtedly necessary to study it.

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

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Research Analyst - Bavadharini KS

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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