Credit Risk Funds

Credit Risk funds invest over 65% of their assets in low-credit quality debt securities with a high risk of default.

time horizon

At least 3-5 years

total funds

14 Funds

total aum

₹23,518 Cr Total AUM

Debt

Explore Credit Risk Mutual Funds

Fund nameFund sizeExpense Ratio
3Y Returns
Bank of India Credit Risk Fund
Bank of India Credit Risk Fund

Credit Risk Moderately High risk

₹140 Cr1.15%41.5%
UTI Credit Risk Fund
UTI Credit Risk Fund

Credit Risk Moderately High risk

₹409 Cr0.89%11.5%
Baroda BNP Paribas Credit Risk Fund
Baroda BNP Paribas Credit Risk Fund

Credit Risk Moderately High risk

₹164 Cr0.79%11.0%
DSP Credit Risk Fund
DSP Credit Risk Fund

Credit Risk Moderately High risk

₹205 Cr0.41%10.2%
Nippon India Credit Risk Fund
Nippon India Credit Risk Fund

Credit Risk High Risk

₹1,027 Cr0.91%9.1%
Aditya BSL Credit Risk Fund
Aditya BSL Credit Risk Fund

Credit Risk Moderately High risk

₹987 Cr0.68%7.8%
Invesco India Credit Risk Fund
Invesco India Credit Risk Fund

Credit Risk Moderately High risk

₹141 Cr0.28%7.3%
ICICI Prudential Credit Risk Fund₹7,302 Cr0.87%7.3%
SBI Credit Risk Fund
SBI Credit Risk Fund

Credit Risk Moderately High risk

₹2,601 Cr0.9%6.9%
Axis Credit Risk Fund
Axis Credit Risk Fund

Credit Risk Moderately High risk

₹478 Cr0.8%6.7%

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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.

Still got questions?
We're here to help.

The return on credit funds can vary depending on the level of interest rates at the time of investment. Investing during the time of high interest rates in the market can work in your favour as that helps you lock in interest rates.
Debt funds invest in debt instruments. Debt instruments basically represent loans where someone borrows money and someone lends the money. Credit risk refers to the risk that the borrower will not be able to return the money to the lender.