Debt: Banking and PSU

What is it?

The banking and PSU debt funds invest a minimum of 80% of the portfolio in the debt instruments of banks, Public Sector Undertakings (PSUs), and Public Financial Institutions.

Objective

These funds aim to generate reasonable returns with low risk exposure by investing primarily in banks and public sector institutions.

Suitability and opinion

As these funds have low volatility, they are a suitable option for risk-averse investors looking to generate modest returns in the short to medium term. These funds aim to generate slightly better returns compared to bank FDs of similar tenure. The risk is very low in this category. But these funds generally beat inflation by a slight margin and can not be used as a tool for long-term wealth creation.