Credit Risk Funds
Credit Risk funds invest over 65% of their assets in low-credit quality debt securities with a high risk of default.
At least 3-5 years
14 Funds
₹22,972 Cr Total AUM
Explore Credit Risk Mutual Funds
| Fund name | Fund size | Expense Ratio | 3Y Returns  |
|---|---|---|---|
 Bank of India Credit Risk Fund Direct Growth Credit Risk Moderately High risk | ₹138 Cr | 1.15% | 40.3% |
 UTI Credit Risk Fund Direct Growth Credit Risk Moderately High risk | ₹392 Cr | 0.91% | 11.5% |
 DSP Credit Risk Fund Direct Growth Credit Risk Moderately High risk | ₹194 Cr | 0.41% | 10.4% |
 Baroda BNP Paribas Credit Risk Fund Direct Growth Credit Risk Moderately High risk | ₹154 Cr | 0.79% | 9.6% |
 Nippon India Credit Risk Fund Direct Growth Credit Risk High Risk | ₹1,024 Cr | 0.8% | 9.1% |
 Aditya BSL Credit Risk Fund Direct Growth Credit Risk Moderately High risk | ₹971 Cr | 0.68% | 7.7% |
 Invesco India Credit Risk Fund Direct Growth Credit Risk Moderate Risk | ₹137 Cr | 0.28% | 7.3% |
 ICICI Prudential Credit Risk Fund Direct Growth Credit Risk High Risk | ₹7,114 Cr | 0.84% | 7.1% |
 SBI Credit Risk Fund Direct Growth Credit Risk High Risk | ₹2,490 Cr | 0.9% | 6.9% |
 Axis Credit Risk Fund Direct Growth Credit Risk Moderately High risk | ₹460 Cr | 0.8% | 6.6% |
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All about Credit Risk Funds
What are Credit Risk Funds?
Credit risk is the risk that the borrower of money may not be able to repay the interest and principal. Credit risk is indicated by credit rating which ranges from AAA (highest credit rating among corporations) to D (imminent risk of default).
In debt investing, credit risk is a significant risk as well as source of returns. Simply put, the potential returns from a low-rated, high-risk debt instrument is higher than a high-rated, low-risk instrument.
Credit risk funds expose your money to credit risk to generate potentially higher returns than, say, investing in government bonds which are considered to be quite low risk.
As per SEBI’s classification, credit risk funds are required to invest at least 65% of their assets in corporate bonds which are rated AA and below.
Benefits of Credit Risk Funds
Higher returns through debt
If you are aiming for high returns but don’t want to invest in equity, an asset class more volatile and riskier than debt, then credit risk funds may fit in your portfolio.
Higher returns than fixed deposits
Credit risk funds and fixed deposits are not exactly comparable. However, investors who can afford to take slightly higher risk then credit risk funds may be right for them.
Taxation on Credit Risk Funds
Debt mutual fund taxation changed on 1st April, 2023. So taxation of capital gains arising from credit risk funds depends on when the investment was made.
STCG on Credit Risk Funds
- For investments made before 1st April, 2023: All gains registered within 3 years from investment are taxed at your marginal income tax rate
- For investments made after 1st April, 2023: Unchanged
LTCG on Credit Risk Funds
- For investments made before 1st April, 2023: All gains registered after 3 years from investment are taxed at a 20% flat tax rate with the benefit of indexation
- For investments made after 1st April, 2023: From 1st April onwards, all debt capital gains lose LTCG and indexation benefits and will be taxed like STCG - at your marginal income tax rate
Dividend Distribution Tax on Credit Risk Funds
Dividends are received from these mutual funds when you invest in their IDCW (Income Distribution Cum Withdrawal) option.
Dividends received are taxed at your marginal income tax rate.
TDS (Tax Deducted at Source) at 10% is applicable on dividends received in excess of Rs 5,000 per AMC per financial year.
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What are the returns on credit risk funds?
What is credit risk in debt funds?
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