Features of Banking and PSU Funds

What are Banking and PSU Funds?

Banking and PSU funds are short-term debt funds that offer a decent amount of returns and also minimise risk by investing in top-rated debt instruments containing securities that are issued by banks and public sector undertakings. Such listed companies are large-cap companies and have AAA ratings from the top credit rating agencies like CRISIL, etc. As per SEBI guidelines for mutual funds, banking, and PSU Funds have to invest at least 80% of their total proceeds in debt instruments issued by such institutions. As a result, these funds have high-ranking credit quality compared to other debt funds offered in the mutual fund market. Banking and PSU funds maintain a favourable balance between liquidity, safety, and yield. Banking and PSU funds hold the phrase “safe investment for conservative investors”....

Features of Banking and PSU Funds

1. Minimum Investment: Under the Banking and PSU Funds, a minimum requirement of 80% of total assets is to be invested in debt instruments issued by Banks, Public Sector Undertakings, and Public Financial Institutions....

Purpose of Banking and PSU Funds

1. To Minimize Risk Factors: Banking and PSU Funds are seen by those investors who look for lower risk in investment schemes. The majority of investment is done in high-rated debt securities, which provide lower risk and also they are backed by the government....

Who should Invest in Banking and PSU Funds?

1. People Who Want to Start Investing in Mutual Funds: Banking and PSU Funds are an excellent option for those investors who are beginners in the field of mutual fund investment as Banking and PSU Funds have lower risk as compared to any other fund scheme. Lower risk will attract the investors and also give them confidence about the mutual fund market....

Factors to Consider Before Investing in Banking and PSU Funds

1. Diversification: Banking and PSU Funds are managed by fund managers, and every fund will have its own set of parameters and composition of different top-rated debt instruments containing securities that are issued by banks and public sector undertakings. So, the investor needs to study the individual composition that fits his investing parameter....

Advantages of Banking and PSU Funds

1. Diversification of Capital: As banking and PSU Funds, invests capital among different top-rated debt instruments containing securities which are issued by banks and public sector undertakings, this gives exposure of different classes of asset to the investor and balances the portfolio as per the prevailing market condition....

Disadvantages of Banking and PSU Funds

1. Low Return: These funds have high demand in the market, as there are minimal risk factors associated with this fund. However, these funds generate lower returns to investors as there is no substantial fluctuation in the stock price of PSU and banks, hence the returns are not substantial....