10 Best PSU Mutual Funds in India for Smart Investors

Investing in the best PSU mutual funds offers government-backed stability, attractive valuations, steady dividends, and sectoral exposure to India’s growth areas like banking, energy, and infrastructure.

These funds provide policy-driven advantages, diversification across industries, and low default risks. For conservative investors or those aiming at short-to-medium term wealth creation, PSU mutual funds are a balanced choice.

Quick Synopsis

• These funds suit risk-averse investors seeking steady income with low volatility.
• Ideal for long-term investors aiming for balanced growth through government-backed securities.
• Typically delivers an average annual return of around 8%.

10 Best PSU Mutual Funds in India

ITI Banking & PSU Debt Fund

Since 2020, this scheme has aimed at income and capital appreciation by investing in banks, PSU, PFI, and municipal debt securities with moderate risk.

• Fund Size: ₹42.49 Crore
• Expense Ratio: 0.7%
• Portfolio: Equity -  0% |Debt - 87.23% | Others - 12.77% |

Franklin India Banking & PSU Debt Fund

An open-ended scheme investing 80% in high-quality debt from banks, PSUs, PFIs, and municipal bonds, aiming for stable returns with low credit risk.

• Fund Size: ₹538.59 Crore
• Expense Ratio: 0.52%
• Portfolio: Equity -  0% |Debt - 93.33% | Others - 6.67% |

ICICI Prudential Banking & PSU Debt Fund

Launched in 2013, this fund generates income by investing predominantly in bank and PSU debt instruments. This fund is benchmarked against the Nifty Banking & PSU Debt Index.

• Fund Size: 10353.87 Crore
• Expense Ratio: 0.73%
• Portfolio: Equity -  0% |Debt - 96.88% | Others - 3.55% |

Kotak Banking and PSU Debt Fund

This open-ended scheme focuses on income generation through investments in bank, PSU, sovereign, and money market securities, with added exposure to government-backed instruments.

• Fund Size: ₹5983.06 Crore
• Expense Ratio: 0.75%
• Portfolio: Equity -  0% |Debt - 94.5% | Others - 5.5% |

Canara Robeco Banking & PSU Debt Fund

An actively managed fund investing in debt of banks, PSUs, PFIs, and municipal bonds, optimising yield, duration, and interest rate opportunities for steady growth.

• Fund Size: ₹227.67 Crore
• Expense Ratio: 0.72%
• Portfolio: Equity -  0% |Debt - 92.15% | Others - 7.85% |

HSBC Banking and PSU Debt Fund

An open-ended scheme focused on bank, PSU, PFI, and municipal debt, offering low credit risk and active risk management through proprietary credit research.

• Fund Size: ₹4675.91Crore
• Expense Ratio: 0.57%
• Portfolio: Equity -  0% |Debt - 99.21% | Others - 0.79% |

HDFC Banking & PSU Debt Fund

This scheme invests at least 80% in debt from banks, PSUs, PFIs, and municipal bodies, aiming for diversification, moderate risk, and steady income generation.

• Fund Size: ₹5935.12Crore
• Expense Ratio: 0.78%
• Portfolio: Equity -  0% |Debt - 95.52% | Others - 4.48% |

Bajaj Finserv Banking and PSU Debt Fund

Designed to generate income by investing in banks, PSUs, PFI, municipal, and sovereign securities, including those backed by the Government of India.

• Fund Size: ₹149.22 Crore
• Expense Ratio: 0.89%
• Portfolio: Equity -  0% |Debt - 92.97% | Others - 7.03% |

SBI Banking and PSU Debt Fund

An open-ended scheme seeking stable income through investments in debt and money market instruments of banks, PSUs, PFIs, and municipal bodies with low credit risk.

• Fund Size: ₹4119.29 Crore
• Expense Ratio: 0.79%
• Portfolio: Equity -  0% |Debt - 95.95% | Others - 4.05% |

Axis Banking and PSU Debt Fund

This fund focuses on high-quality debt of banks, PFIs, and PSUs, making it suitable for investors with a 12+ month horizon seeking safer alternatives.

• Fund Size: ₹13286.45 Crore
• Expense Ratio: 0.63%
• Portfolio: Equity -  0% |Debt - 96.82% | Others - 3.18% |

10 Best PSU Mutual Fund Returns Rate (As on 21st August, 2025)

Beyond mutual funds, options like FDs and RDs remain the most secure choices. Book your FD or RD through the Stable Money app and get an 8.40% return from Suryoday SF bank.

How to Choose Best Mutual Fund for Investing?

• Check the historical performance of the best PSU mutual funds to evaluate consistency and competitiveness.
• Compare expense ratios, as lower costs generally improve overall returns.
• Study the portfolio composition to understand sector exposure and risk levels.
• Assess the fund manager’s expertise in handling market fluctuations.
• Align the risk-return profile with your personal financial goals for better suitability.

Who Should Invest in these Mutual Funds?

• Risk-averse investors who prefer relatively stable returns with limited volatility.
• Long-term investors aiming to grow wealth steadily over several years.
• Income seekers looking for potential dividend payouts from their investments.
• Sector-focused investors with a positive outlook on banking, energy, or government-backed enterprises.

How Can One Invest in PSU Mutual Funds?

• Open a Demat account to begin your investment journey.
• Identify the best PSU mutual fund by analysing performance, expense ratio, and management expertise.
• Select an investment mode such as a lump sum or SIP, depending on your goals.
• Complete KYC formalities by submitting PAN, bank, and personal details to activate your investment.

NOTE: Even if you research thoroughly, it is best to consult a financial advisor before investing.

The best PSU mutual fund list provides investors with safe, government-backed opportunities combining steady returns, low credit risk, and diversified exposure to vital sectors.

These funds are particularly suitable for conservative and long-term investors seeking balanced growth.

Similarly, fixed-income options like FDs and RDs offer guaranteed returns over short to medium-term periods. For secure and hassle-free investing, book your FD easily through the Stable Money app. 

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