1. banking And PSU Debt funds are mutual fund schemes that invest in loan and money market instruments issued by banks and public undertakings and public financial institutions.

2. At least 80% of the corpus of the scheme should be in instruments issued by banks and PSUs and PFIs.

3. All these entities are backed, regulated or controlled by the government which minimizes the default risk and hence the scheme is considered as low credit risk.

4. The fund manager puts in calls in short term instruments or long term debt instruments and hence the scheme is subject to interest rate risk.

5. These funds can give higher returns than bank FDs of the same tenure.

(Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)