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Banking and PSU mutual funds delivered steady 1-year returns between 7.04% and 7.65% in February 2026.
Kotak and ICICI Prudential funds lead in 3-year performance with returns up to 7.90%.
Large Assets Under Management (AUM) sizes, such as Axis with Rs. 12,862.90 Cr and Bandhan with Rs. 12,553.50 Cr, show strong investor confidence.
Banking and PSU mutual funds invest mainly in debt instruments issued by banks, public sector companies, and government-backed institutions. These funds are known for stable returns and lower risk compared to equity schemes. Many banking and PSU debt funds have delivered steady performance over both short- and long-term periods. The data below highlights some of the best-performing options based on assets under management (AUM) and returns.
Axis Banking and PSU Debt Fund Direct – Growth is one of the largest funds in this category. It has a Net Asset Value (NAV) of Rs. 2,815.42 and a strong AUM of Rs. 12,862.90 crore. The fund has delivered a 0.79% return in 1 month and 0.88% in 3 months. The 1-year return stands at 7.32%. Over 3 years, it has generated 7.48%, while the 5-year return is 6.18%.
The large asset size shows strong investor trust. Returns are consistent across time periods. This mutual fund suits investors looking for stability with moderate growth.
Bandhan Banking and PSU Fund Direct – Growth has a NAV of Rs. 26.21 and manages Rs. 12,553.50 crore. It delivered a 0.80% return in 1 month and 0.99% in 3 months. The 1-year return is 7.04%. Over 3 years, the fund booked 7.43% profits, and the 5-year return is 6.20%.
Short-term performance is slightly better compared to peers. The fund also holds a strong long-term track record. It can be suitable for investors who want regular income with limited volatility.
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ICICI Prudential Banking & PSU Debt Fund Direct – Growth has a NAV of Rs. 35.43 and AUM of Rs. 9,583.50 crore. The fund recorded a 1-month profit of 0.71% and a 3-month return of 0.94%. Over 1 year, it delivered 7.44% gains, while the 3-year return is 7.85%, and the 5-year return stands at 6.77%.
The 3-year and 5-year growth is among the highest in this group. This shows strong fund management and a disciplined strategy. Investors searching for better long-term returns within the debt category may consider this scheme.
Aditya Birla Sun Life Banking & PSU Debt Fund Direct – Growth has a NAV of Rs. 393.49 and AUM of Rs. 9,003.83 crore. It generated profits of 0.79% in 1 month and 0.65% in 3 months. The 1-year return is 7.11%. Over 3 years, it delivered a 7.60% return, and the 5-year return is 6.44%.
Performance has remained balanced across different market cycles. The 3-year return of 7.60% reflects strong portfolio quality. This fund may fit investors who prefer steady income with moderate duration risk.
HDFC Banking and PSU Debt Fund Direct – Growth has a NAV of Rs. 24.82 and an AUM of Rs. 5,619.99 crore. The fund delivered gains of 0.82% in 1 month and 0.79% in 3 months. The 1-year return stands at 7.29%. Over 3 years, it generated a 7.71% return, and the 5-year return is 6.43%.
The fund shows stable returns across all time frames. The 3-year performance of 7.71% is impressive within the category. It is a suitable option for conservative investors who want predictable performance.
Kotak Banking and PSU Debt Fund Direct – Growth has a NAV of Rs. 70.80 and manages Rs. 5,495.35 crore. The 1-month return is 0.84%, and the 3-month return is 0.90%. Over 1 year, it delivered 7.65% profits. The 3-year return stands at 7.90%, while the 5-year return is 6.65%.
This fund has one of the highest 1-year and 3-year returns among the listed schemes. The 3-year return of 7.90% suggests strong consistency. Investors looking for better medium-term gains within debt funds may find this scheme attractive.
Nippon India Banking and PSU Fund Direct – Growth has a NAV of Rs. 22.26 and AUM of Rs. 5,436.11 crore. It delivered profits of 0.85% in 1 month and 0.66% in 3 months. The 1-year return is 7.20%. Over 3 years, the fund booked 7.65% gains, and the 5-year return stands at 6.45%.
The 0.85% return over 1 month is among the highest in this group. Long-term performance remains solid and stable. This fund is suitable for investors who prefer low credit risk and reasonable growth.
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Interest rates have shown stability in recent months, which supports debt fund performance. Banking & PSU funds mainly invest in high-quality instruments. This reduces default risk and supports steady income generation.
Most top funds in this category have delivered around 7% to 7.90% over 3 years. The 5-year returns range between 6.18% and 6.77%. These numbers indicate consistent income with limited volatility.
Large AUM sizes, especially above Rs. 9,000 crore, reflect investor confidence. Funds like Axis and Bandhan manage over Rs. 12,000 crore, indicating strong demand.
Banking & PSU mutual funds remain a strong choice for conservative portfolios. Returns across short and long periods are stable. Kotak Banking and PSU Debt Fund Direct – Growth and ICICI Prudential Banking & PSU Debt Fund Direct – Growth stand out in 3-year performance. Axis and Bandhan funds lead in asset size.
Careful selection based on return history, asset size, and risk profile can help achieve steady financial growth. These funds provide a balance between safety and reasonable returns, making them suitable for investors seeking stability in changing market conditions.
What are banking & PSU mutual funds?
These are debt mutual funds that invest mainly in bonds issued by banks, public sector companies, and government-backed institutions.
Are banking & PSU mutual funds safe?
They are considered lower risk compared to equity funds because they invest in high-quality debt instruments. However, interest rate risk still exists.
What kind of returns can be expected in banking & PSU mutual funds?
Recent data shows 1-year returns between 7.04% and 7.65%, while 3-year returns range from 7.43% to 7.90%.
Who should invest in banking & PSU mutual funds?
They are suitable for conservative investors looking for stable income with moderate returns and lower volatility.
How long should the investment in banking and PSU mutual funds be held?
A holding period of at least 2 to 3 years is generally preferred to benefit from stable performance and reduced short-term fluctuations.
