{"id":976,"date":"2012-12-10T10:49:08","date_gmt":"2012-12-10T05:19:08","guid":{"rendered":"https:\/\/blog.fundsindia.com\/blog\/?p=976"},"modified":"2013-04-08T16:32:47","modified_gmt":"2013-04-08T11:02:47","slug":"what-are-banking-debt-funds","status":"publish","type":"post","link":"https:\/\/fundsindia.com\/blog\/mf-research\/mutual-funds\/what-are-banking-debt-funds\/976","title":{"rendered":"What are banking debt funds?"},"content":{"rendered":"<div class=\"list-content\"> Are these funds novel? Not necessarily. A number of short-term debt funds invest a chunk of their money in money market instruments and short-term debt of banks.\u00a0<\/div>\n<p>Religare Mutual recently launched an open-ended debt scheme Religare Bank Debt Fund. Earlier this year, Axis Mutual had released a similar scheme. A few other fund houses are also reported to launch similar products. So what are these funds and how suitable are they?<\/p>\n<p>Banking debt funds simply seeks to invest a majority of their assets in instruments issued by banks. For instance, Religare Bank Debt Fund will invest 80-100 per cent in debt and money market instruments issued by banks and can invest up to 20 per cent in other short-term debt instruments. Since these are short-term instruments with maturity ranging from overnight to a maximum of 90 days, their average portfolio maturity is expected to be about 15 days.<\/p>\n<p>But in the case of Axis Banking Fund, the average maturity may extend a bit more to about 6 months.<\/p>\n<p>Simply put, these funds are for the short-to-medium term. Since they primarily invest in instruments issued by banks, their credit quality can be expected to be high. These funds are suitable for investors who have a time horizon of upto a year and who value reasonable safety as against high returns. While the yields of most bank instruments \u2013 treasury bills and certificates of deposits remain over 8 per cent given the tight liquidity scenario, this may ease when interest rates see a marked decline. That means, you may not always enjoy a high return in these funds.<\/p>\n<p>This, again, is true of other short-term debt funds.<\/p>\n<p>So are these funds novel? Not necessarily. A number of short-term debt funds invest a chunk of their money in money market instruments and short-term debt of banks. In this aspect, banking debt funds are not new fangled themes. But as these funds seek to invest a majority of their assets only in bank instruments, they have perhaps been coined as \u2018banking debt funds\u2019. A large proportion invested in banking debt may also lend credibility given the higher rating that most bank instruments enjoy.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Religare Mutual recently launched an open-ended debt scheme Religare Bank Debt Fund. Earlier this year, Axis Mutual had released a similar scheme. A few other fund houses are also reported to launch similar products. So what are these funds and how suitable are they? Banking debt funds simply seeks to invest a majority of their [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v17.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What are banking debt funds?<\/title>\n<meta name=\"description\" content=\"Banking debt funds simply seek to invest a majority of their assets in instruments issued by banks. 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