Top 5 Best Banking and PSU Debt Mutual Funds to invest in 2020




top 5 Best Banking and PSU Debt FundsTop 5 Best Banking and PSU Debt Funds 2020


Post Franklin debt funds fiasco, investors are concerned about investing in debt mutual funds. While corporate bond funds or dynamic bond funds provide high returns, these are high risk. If you are looking for moderate risk debt funds, you can opt for Banking and PSU debt mutual funds. SEBI has introduced new sub category in debt funds which is banking and PSU debt fund. These funds have performed well and gave 8% to 10% annualized returns in the last 6 months to 5 years tenure. Which are the Top 5 Best Banking and PSU debt mutual funds to invest in 2020?

Also Read: Best Index Mutual Funds to invest in 2020

What are Banking and PSU debt Funds?

Banking and PSU debt mutual funds would invest in debt instruments of PSU enterprises and banks. It would invest in AAA rated debt instruments or relevant rated depending on the objectives of the scheme. Since it invests in debt instruments of PSU enterprises other than banks, these are considered as a relatively safe investment option.

List of Top 5 Best Banking and PSU Debt Mutual Funds for 2020

Here are the top 5 mutual funds from this category.

1) Edelweiss Banking and PSU Debt Fund

2) Aditya Birla Sun Life Banking & PSU Debt Fund

3) Nippon India Banking & PSU Debt Fund

4) Kotak Banking and PSU Debt Fund Regular Plan

5) DSP Banking & PSU Debt Fund

Top 5 Best Banking and PSU Debt Mutual Funds to invest in 2020

Let us now check the expense ratio and performance of these best performing banking and PSU debt funds.

1) Edelweiss Banking and PSU Debt Fund

The Scheme seeks to generate income by investing predominantly in a portfolio of Debt Securities and Money Market Instruments issued by banks, PSUs, Public Financial Institutions, entities major owned by Central and State Governments and Municipal Bonds.

Fund NameEdelweiss Banking and PSU Debt Fund
AUM - Rs Crores259
Valueresearch Rating3 Star
Expense Ratio (%)0.6%
Returns - 3 months6.1%
Returns - 6 months9.8%
Returns - 1 Year14.0%
Annualised Returns - 3 Years10.2%
Annualised Returns - 5 Years9.3%
Annualised Returns - 10 YearsNA

This fund performed well compared to its peers if you check the returns of 1 year, 3 years and 5 years.

2) Aditya Birla Sun Life Banking & PSU Debt Fund

The scheme seeks to generate reasonable returns by primarily investing in debt and money market securities that are issued by Banks, Public Sector Undertakings (PSUs) and Public Financial Institutions (PFIs) in India.

Fund NameAditya Birla Sun Life Banking & PSU Debt Fund
AUM - Rs Crores12,702
Valueresearch Rating3 Star
Expense Ratio (%)0.7%
Returns - 3 months5.0%
Returns - 6 months7.1%
Returns - 1 Year11.2%
Annualised Returns - 3 Years8.7%
Annualised Returns - 5 Years9.2%
Annualised Returns - 10 Years9.5%

Even this fund performed well compared to its peers if you check the returns of 1 year, 3 years and 5 years.

3) Nippon India Banking & PSU Debt Fund

The scheme seeks to generate income over short to medium term horizon through investments in debt and money market instruments of various maturities, consisting predominantly of securities issued by entities such as Banks, Public Sector Undertakings (PSUs) and Public Financial Institutions.

Fund NameNippon India Banking & PSU Debt Fund
AUM - Rs Crores5,211
Valueresearch Rating3 Star
Expense Ratio (%)0.8%
Returns - 3 months4.7%
Returns - 6 months7.2%
Returns - 1 Year11.9%
Annualised Returns - 3 Years8.8%
Annualised Returns - 5 Years8.9%
Annualised Returns - 10 YearsNA

Even this fund performed well compared to its peers if you check the returns of 1 year to 5 year period.

4) Kotak Banking and PSU Debt Fund Regular Plan

The scheme seeks to generate income by predominantly investing in debt & money market securities issued by Banks, Public Sector Undertaking (PSUs), Public Financial Institutions (PFI), Municipal Bonds and Reverse repos in such securities, sovereign securities issued by the Central Government and State Governments, and/or any security unconditionally guaranteed by the Govt. of India.

Fund NameKotak Banking and PSU Debt Fund Regular Plan
AUM - Rs Crores7,146
Valueresearch Rating3 Star
Expense Ratio (%)0.8%
Returns - 3 months5.3%
Returns - 6 months6.7%
Returns - 1 Year11.4%
Annualised Returns - 3 Years8.9%
Annualised Returns - 5 Years8.9%
Annualised Returns - 10 Years8.6%

This fund performed well compared to its peers if you check the returns of 3 months to 5 year period.

5) DSP Banking & PSU Debt Fund

The Scheme seeks to generate income and capital appreciation by primarily investing in a portfolio of high quality debt and money market securities that are issued by banks and public sector entities/undertakings.

Fund NameDSP Banking & PSU Debt Fund
AUM - Rs Crores3,143
Valueresearch Rating3 Star
Expense Ratio (%)0.6%
Returns - 3 months4.6%
Returns - 6 months7.2%
Returns - 1 Year11.9%
Annualised Returns - 3 Years8.6%
Annualised Returns - 5 Years8.8%
Annualised Returns - 10 YearsNA

This fund performed well compared to its peers in the last 6 months to 5 year period. This fund also has the lowest expense ratio compared to top performing funds in this category.

FAQs about Banking and PSU Debt Funds


How safe are banking and PSU debt funds?

You might be thinking that “is banking and PSU debt fund safe”. These funds would invest in debt of the banking and PSU enterprises. While investing in the debt of PSU enterprises is relatively safe, debt papers of banks are still risky. These funds would invest in debt papers of scheduled commercial banks, which includes private sector banks, public sector banks, payment banks, small finance banks etc.,

Which are the safest debt funds?

Debt funds turned high risk in the last couple of years. Debt funds invest in debt papers of corporates. There has been a default / delay in repayment of commercial/debt papers from such private sector corporates, hence debt funds are now considered as high risk. Liquid funds are considered as safe funds, while there are rare chances where NAV of such funds would fall.

Also Read: Which are the good balanced mutual funds to invest?

Which are top rated banking and PSU debt funds as per Valueresearch?

Valueresearch rates mutual funds and give 1 to 5 stars. Here are the top rated banking and PSU debt funds as per Valueresearch online.

i) Axis Banking & PSU Debt Fund – 5 Star

ii) Kotak Banking and PSU Debt Fund – 4 Star

iii) IDFC Banking & PSU Debt Fund – 4 Star

iv) LIC MF Banking & PSU Debt Fund – 4 Star

Who can invest in Banking and PSU Debt Funds?

Moderate risk takers, who are willing to invest for 1 to 3 years time frame can invest in these banking and PSU debt mutual funds.

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Suresh KP

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