Last Updated on Aug 5, 2022 by Nikitha

The term debt doesn’t need an introduction; it means loan. Debt mutual funds are a scheme which pools money from investors. This money is used to purchase debentures or bonds issued by the public, private or government entities. Hence, when you invest in debt mutual funds, you indirectly give these entities loans. As it majorly deals with debt instruments that earn a fixed interest rate, the risk is lower as compared to equity mutual funds

10 Best Debt Mutual Funds in 2022

Here’s a list of the 10 best debt mutual funds in India you can consider in 2022. Note that the list is curated as of 4th August 2022. 

The parameters used to filter the best debt mutual funds are as follows:

  • Category – Debt 
  • Plan – Growth 
  • CAGR 3 yr – set from high to low
Name of the fundSub categoryAbsolute returns 1Y (%)CAGR 3 yrs (%)CAGR 5 yrs (%)
Bank of India Credit Risk FundCredit Risk Fund142.5113.78-3.84
Aditya Birla SL Medium Term PlanMedium Duration Fund25.0010.308.37
HDFC FMP-XXVII-1846D-Aug 2013Fixed Maturity Plans6.169.668.40
HDFC FMP-Sr 42-1487D-Aug 2018Fixed Maturity Plans5.969.55
UTI Dynamic Bond FundDynamic Bond Fund19.338.915.46
Baroda BNP Paribas Credit Risk FundCredit Risk Fund13.498.687.44
JM Low Duration FundLow Duration Fund3.728.375.32
UTI ST Income FundShort Duration Fund8.238.435.14
ICICI Pru Credit Risk FundCredit Risk Fund5.538.358.07
HDFC Credit Risk Debt FundCredit Risk Fund4.288.157.53

1. Bank of India Credit Risk Fund

Bank of India Mutual Fund launched a debt fund on 27 February 2015. The minimum investment required for the Bank of India Credit Risk Fund is Rs. 5,000. As of 03 August 2022, the Net Asset Value (NAV) was Rs. 10.365. As of 30 June 2022, the Assets Under Management (AUM) is Rs. 166 cr., and the expense ratio is 1.56%. 

2. Aditya Birla SL Medium Term Plan

This debt fund was launched by Aditya Birla Capital Mutual Funds on 26 March 2009. The minimum investment required is Rs. 1,000. As of 03 August 2022, the NAV on Aditya Birla SL Medium Term Plan was Rs. 30.693. As of 30 June 2022, the AUM is Rs. 1,416 cr., and the expense ratio is 1.57%. 

3. HDFC FMP-XXVII-1846D-Aug 2013

HDFC Mutual Funds launched this debt fund on 14 August 2013. The minimum investment required is Rs. 5,000. On 03 August 2022, the NAV on this fund was Rs. 21.17. As of 30 June 2022, the AUM is Rs. 252.32 cr., and the expense ratio is 0.25% as of 30 September 2021. 

4. HDFC FMP-Sr 42-1487D-Aug 2018

This debt fund was launched by HDFC Mutual Funds on 04 September 2018. The minimum investment required is Rs. 5,000. On 03 August 2022, the NAV on this fund was Rs. 13.84. As of 07 June 2022, the AUM is Rs 824.05 cr., and the expense ratio is 0.25%.  

5. UTI Dynamic Bond Fund

UTI Mutual Fund launched this scheme on 16 June 2010. The minimum investment required is Rs. 500. As of 03 August 2022, the NAV on this fund was Rs. 25.23. As of 30 June 2022, the AUM is Rs 362.81 cr., and the expense ratio is 0.92%.  

6. Baroda BNP Paribas Credit Risk Fund

This fund was launched by Baroda BNP Paribas Mutual Funds on 23 January 2015. The minimum investment required is Rs. 5,000. On 03 August 2022, the NAV on this fund was Rs. 17.81. As of 30 June 2022, the AUM is Rs. 201.8 cr., and the expense ratio is 1.6%. 

7. JM Low Duration Fund

This fund was launched by JM Financial Mutual Funds on 27 September 2006. The minimum investment required is Rs. 5,000. On 03 August 2022, the NAV on this fund was Rs. 30.99. As of 30 June 2022, the AUM is Rs. 142 cr., and the expense ratio is 0.24%. 

8. UTI ST Income Fund

UTI Mutual Funds launched this debt fund on 22 May 2009. The minimum investment required is Rs. 500. On 03 August 2022, the NAV on this fund was Rs. 25.74. As of 30 June 2022, the AUM is Rs. 2,264 cr., and the expense ratio is 0.34%. 

9. ICICI Pru Credit Risk Fund

ICICI Prudential Mutual Fund launched this debt mutual fund on 03 December 2010. The minimum investment required is Rs. 1,000. On 03 August 2022, the NAV on this fund was Rs. 25.47. As of 30 June 2022, the AUM is Rs. 7924.8 cr., and the expense ratio is 1.54%. 

10. HDFC Credit Risk Debt Fund

HDFC Mutual Fund launched this debt mutual fund on 25 March 2014. The minimum investment required is Rs. 5,000. On 03 August 2022, the NAV on this fund was Rs. 19.53. As of 30 June 2022, the AUM is Rs. 8576.32 cr., and the expense ratio is 1.57%. 

FAQs 

1. What is the taxation on debt mutual funds?

– If you sell your debt fund before 3 yrs from the investment date, then short-term capital gain tax (STCG) is applicable. The gains will be added to your income and taxed as per your income tax slab.
– If you sell your debt fund after 3 yrs from the purchase date, 20% tax will be levied on the gains as per the long-term capital gains tax (LTCG).

2. Are debt mutual funds ideal for short-term or long-term?

Debt mutual funds are suited for both short-term and long-term. The investment horizon depends on the investor’s investment goal and the fund they opt for. 

3. Who should invest in debt mutual funds?

Debt mutual funds are suited for:
– Investors with low-risk tolerance and seeking regular income.
– Investors looking to park their funds safely for a short duration.
– First-time mutual fund investors and looking for a replacement for fixed deposits. 

4. Is there any risk involved in debt mutual funds? 

Yes, like most investments, debt mutual funds come with certain risks such as interest rate and credit risk.