What are Banking & PSU Debt Funds
Banking & PSU debt funds are open-ended debt mutual funds, which primarily invests in fixed income securities issued by public sector companies, banks and public financial institutions (PFIs). According to the SEBI’s classification of mutual fund schemes, Banking & PSU debt funds have to invest at least 80% of their total assets in debt securities issued by PSUs, banks and PFIs. Some of these funds also invest in bonds issued by central and state governments, in addition to the mandated securities, for the purpose of generating alpha.
Top 10 Banking & PSU Funds to Invest
| Fund Name | Returns (%) | |||
| 1 year | 3 year | 5 year | 10 year | |
| ICICI Prudential Banking & PSU Debt Fund | 7.93 | 7.43 | 6.38 | 7.50 |
| Kotak Banking and PSU Debt Fund | 7.77 | 7.31 | 6.13 | 7.42 |
| DSP Banking & PSU Debt Fund | 7.39 | 7.30 | 5.94 | 7.24 |
| HDFC Banking & PSU Debt Fund | 7.85 | 7.25 | 6.03 | 7.36 |
| Aditya Birla Sun Life Banking & PSU Debt Fund | 7.83 | 7.25 | 6.10 | 7.53 |
| Nippon India Banking and PSU Fund | 7.77 | 7.22 | 5.98 | 7.36 |
| Franklin India Banking & PSU Debt Fund | 7.93 | 7.16 | 5.92 | 7.23 |
| SBI Banking and PSU Fund | 7.94 | 7.16 | 5.68 | 7.00 |
| Bandhan Banking and PSU Fund | 7.68 | 7.14 | 5.87 | 7.19 |
| Invesco India Banking and PSU Fund | 7.70 | 7.14 | 5.31 | 6.47 |
Data as on September 12, 2025
Risks of Investing in Banking & PSU Debt Funds
- As Banking & PSU Funds invest primarily in bonds issued by banks, PSUs and PFIs, they are exposed to sector-specific concentration risk.
- As with any bonds, rising interest rates can adversely impact the bond prices issued by banks, PSUs and PFIs.
- While Banking & PSU Funds predominantly hold high-quality instruments, these instruments still carry some credit risk.
1 Comment Comments
A detailed article covering all the points one needs to know before investing. I thank the author for clarifying many of my queries in this article.