1. Banking and PSU debt funds are mutual fund schemes that invest debt and money market instruments issued by banks and PSUs and public financial institutions.
2. At least 80% of the corpus of the scheme needs to be in instruments issued by banks and PSUs, and PFIs.
3. All these entities are either backed, regulated or controlled by the government which reduces default risk and hence the scheme is supposed to have low credit risk.
4. Fund manager takes the call on whether to be in the short-term instruments or long-term debt instruments and hence the scheme carries interest rate risk.
5. These funds may give higher returns than Bank FDs of similar duration.
(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
