Top 8 Debt Mutual Funds in India (2025) – Best for Safe Returns
Debt mutual funds are ideal for conservative investors seeking stable returns with lower risk compared to equity. They invest in fixed-income securities like bonds, government securities, debentures, and treasury bills. Below is an in-depth guide on different debt fund categories, their returns (as of July 15, 2025):
1. Banking and PSU Debt Funds
Definition: Invest in debt instruments issued by banks, PSUs, and financial institutions.
Ideal For: Safety-focused investors seeking better-than-FD returns.
Where They Invest: High-rated bonds like SBI, PFC, NABARD.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| Kotak Banking and PSU Debt | 9.1% | 7.66% |
| ICICI Prudential Banking & PSU | 8.78% | 7.84% |
| Nippon India Banking & PSU | 9.11% | 7.55% |
| HDFC Banking & PSU Debt | 9.01% | 7.53% |
2. Dynamic Bond Funds
Definition: Fund managers change duration based on interest rate view.
Ideal For: Investors with moderate risk who want duration play.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| 360 ONE Dynamic Bond | 10.49% | 8.32% |
| Nippon India Dynamic Bond | 10.06% | 8.39% |
| ICICI All Seasons Bond | 9.45% | 8.34% |
| Aditya Birla Dynamic Bond | 9.6% | 8.04% |
3. Corporate Bond Funds
Definition: 80%+ invested in AAA-rated corporate papers.
Ideal For: Low-risk investors wanting better yield than G-Secs.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| Baroda BNP Corporate Bond | 9.97% | 7.89% |
| Franklin Corporate Bond | 10.31% | 7.67% |
| HDFC Corporate Bond | 9.32% | 8.02% |
4. Credit Risk Funds
Definition: At least 65% in AA and below-rated corporates.
Ideal For: High-risk investors chasing better yields.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| DSP Credit Risk Fund | 22.97% | 14.74% |
| HSBC Credit Risk Fund | 21.43% | 11.19% |
| Aditya Birla Credit Risk Fund | 16.81% | 10.44% |
5. Floater Funds
Definition: Invest in bonds with floating interest rates.
Ideal For: Investors expecting rising interest rates.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| Axis Floater Fund | 9.93% | 8.29% |
| DSP Floater Fund | 9.35% | 8.21% |
| HDFC Floating Rate Fund | 8.97% | 8.11% |
6. Gilt Funds (10Y Duration)
Definition: Invests only in 10-year G-Secs, no credit risk.
Ideal For: Long-term investors OK with rate fluctuations.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| ICICI Constant Maturity Gilt | 10.93% | 9.06% |
| Bandhan Constant Maturity | 10.67% | 9.05% |
| SBI Magnum Constant Maturity | 10.15% | 8.77% |
7. Gilt Funds (Flexible Duration)
Definition: Invest across all G-Secs with sovereign safety.
Ideal For: Risk-averse investors seeking govt. bonds.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| Baroda BNP Gilt Fund | 10.24% | 8.51% |
| ICICI Gilt Fund | 9.66% | 8.78% |
| SBI Magnum Gilt | 8.16% | 8.28% |
8. Medium Duration Funds
Definition: Macaulay duration of 3–4 years, good for medium-term.
Ideal For: Investors with 3–5 year horizon & moderate risk.
| Fund Name | 1 Yr Return | 3 Yr Return |
|---|---|---|
| Aditya Birla Medium Term | 13.88% | 9.56% |
| Nippon India Medium Duration | 11.42% | 8.33% |
| Axis Strategic Bond | 9.62% | 8.12% |
