Banking Sector Mutual Funds invest in stocks of banks & other financial institutions with an objective to generate profits for investors.
| Fund Name | Scripbox Opinion | Till Date CAGR | |
|---|---|---|---|
19.639% | 18.767% | ||
7.957% | 6.283% | ||
7.83% | 7.947% | ||
7.364% | 7.128% | ||
7.129% | 6.335% | ||
6.283% | 6.046% | ||
6.856% | 6.885% | ||
17.97% | 19.806% | ||
8.038% | 7.029% | ||
17.076% | 15.894% | ||
7.29% | 7.461% | ||
7.228% | 7.764% | ||
23.157% | 16.475% | ||
18.759% | 18.045% | ||
19.068% | 13.838% | ||
7.586% | 6.492% | ||
6.805% | 5.809% | ||
7.926% | 7.779% | ||
13.207% | 11.604% | ||
19.654% | 8.446% |
Below are the banking sector mutual funds in india:
ICICI Prudential Value Discovery Fund Direct (G) is a Equity fund that has delivered a 1 Year return of 12.7%, a 3 Years return of 19.6% and a 5 Years return of 30.8%. The fund has an expense ratio of 1.1% and an AUM of ₹49131 crores as of 2025-04-20.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 92.68% to equities, 1.40% to debt and 5.91% to other assets.
BHARAT Bond FOF - April 2031 Direct (G) is a Debt fund that has delivered a 1 Year return of 10.4% and a 3 Years return of 8.0%. The fund has an expense ratio of 0.1% and an AUM of ₹4773 crores as of 2025-04-20. It was Launched on 2020-07-23. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 095.73% to debt and 4.27% to other assets.
HDFC Floating Rate Debt Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 9.2%, a 3 Years return of 7.8% and a 5 Years return of 7.3%. The fund has an expense ratio of 0.3% and an AUM of ₹14724 crores as of 2025-04-20. It was Launched on 2013-01-01. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.51% to debt and 3.49% to other assets.
Nippon India Arbitrage Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.8%, a 3 Years return of 7.4% and a 5 Years return of 6.2%. The fund has an expense ratio of 0.4% and an AUM of ₹13733 crores as of 2025-04-20.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates -0.33% to equities, 26.24% to debt and 74.09% to other assets.
Kotak Nifty SDL Apr 2027 Top 12 Equal Weight Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 9.1% and a 3 Years return of 7.1%. The fund has an expense ratio of 0.2% and an AUM of ₹7714 crores as of 2025-04-20. It was Launched on 2022-02-11. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 097.70% to debt and 2.30% to other assets.
HDFC Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.5%, a 3 Years return of 6.3% and a 5 Years return of 5.0%. The fund has an expense ratio of 0.1% and an AUM of ₹9087 crores as of 2025-04-20. It was Launched on 2013-01-01. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 07.69% to debt and 92.31% to other assets.
ICICI Prudential Liquid Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.4%, a 3 Years return of 6.9% and a 5 Years return of 5.5%. The fund has an expense ratio of 0.2% and an AUM of ₹42293 crores as of 2025-04-20.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹1000. The fund allocates 0118.62% to debt and -18.62% to other assets.
Parag Parikh Flexi Cap Fund Direct (G) is a Equity fund that has delivered a 1 Year return of 13.5%, a 3 Years return of 18.0% and a 5 Years return of 28.6%. The fund has an expense ratio of 0.6% and an AUM of ₹93441 crores as of 2025-04-20. It was Launched on 2013-05-24. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 77.24% to equities, 21.44% to debt and 1.32% to other assets.
BHARAT Bond ETF FOF - April 2032 Direct (G) is a Debt fund that has delivered a 1 Year return of 10.5% and a 3 Years return of 8.0%. The fund has an expense ratio of 0.1% and an AUM of ₹4484 crores as of 2025-04-20. It was Launched on 2021-12-15. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.83% to debt and 3.17% to other assets.
ICICI Prudential Bluechip Fund Direct (G) is a Equity fund that has delivered a 1 Year return of 10.3%, a 3 Years return of 17.1% and a 5 Years return of 25.2%. The fund has an expense ratio of 0.9% and an AUM of ₹64963 crores as of 2025-04-20.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 95.61% to equities, 0.78% to debt and 3.61% to other assets.
Banking Sector mutual funds primarily invest in equity and equity-related instruments of core banks and other financial institutions with the objective of generating profits for the investor. It is a sector-based mutual fund that uses a diversified strategy to invest in core banking companies. The fundamental purpose of introducing mutual funds in the Banking and Finance Sector is to boost investment in this sector of the economy.
Banking sector mutual funds invest across the following two industries:
| Fund Name | 3 Year Returns | 5 Year Returns |
| Kotak Nasdaq 100 FOF Direct (G) | 12.9% | NA |
| Mirae Asset ELSS Tax Saver Fund Direct (G) | 13.9% | 21% |
| Kotak Gold Fund Direct (G) | 14% | 13.7% |
| BHARAT Bond FOF – April 2031 Direct (G) | 6.3% | NA |
| ICICI Prudential Value Discovery Fund Direct (G) | 21.6% | 26% |
| Fund Name | 3 Year Returns | 5 Year Returns |
| HDFC Banking & Financial Services Fund Regular (G) | 12.3% | NA |
| SBI Banking and Financial Services Fund Regular (G) | 13.7% | 15.2% |
| ICICI Banking and Financial Services Fund Regular (G) | 11.7% | 13.1% |
| Mirae Asset Banking and Financial Services Fund Regular (G) | 12.8% | NA |
| TATA Banking and Financial Services Fund Regular (G) | 13% | 14.3% |
Following are the key advantages of investing in banking sector mutual funds:
Banking sector mutual funds are professionally managed funds that invest in stocks from the banking industry. The fund managers are only allowed to invest in banking and financial sector stocks. These funds are appropriate for investors with a high-risk tolerance level. Since these are pure equity schemes, they are highly risky. At the same time, they can generate substantial returns in favourable market situations.
On the other hand, if the banking sector witnesses a downturn, the stocks will lose value. Therefore, invest in banking sector funds only if you understand the sector dynamics and are an experienced investor. Furthermore, even if you are well aware of the market and its dynamics, a more than 10% portfolio exposure in banking sector funds is not advisable.
Banking and financial institutions are always on the go to offer best-in-class experience and service for their clients. Though the future looks bright for the banking industry with the backing of the RBI and government. Following are some parameters that will help you select the best banking sector mutual fund for investment:
Increased infrastructure spending, faster project delivery, and the continuation of reforms are likely to provide the banking industry with a boost. All of these elements point to a strong future for India’s banking sector, as companies with rapid expansion plans will look to banks for financing.
Additionally, technological advancements have pushed mobile and online banking to the forefront. The banking industry is putting a greater emphasis on offering better services to customers and modernizing its digital infrastructure. This is to improve the overall customer experience and have a competitive advantage.
India’s digital lending is expected to reach USD 1 trillion by FY23. Furthermore, the Indian fintech sector is estimated to reach INR 6.2 trillion by 2025.
A banking sector fund’s past performance does not guarantee future results. Analysing the fund’s returns in comparison to its benchmark and peers, on the other hand, can assist you in evaluating its performance. Funds with a track record of consistently outperforming their benchmark and peers are good investing options. Furthermore, evaluating historical returns will allow you to better understand the fund manager’s and the fund’s performance over time.
Banking sector mutual funds aim to develop long-term wealth by taking advantage of the banking industry’s long-term growth potential. The fund manager picks promising stocks only after a thorough analysis of the company and its prospects. To minimize risk, the fund’s portfolio is kept as broad as possible. Thus, you should always identify well-diversified funds across the sector.
As the risk associated with banking sector funds is high, you must have a long-term investing horizon. By holding your investments for a longer period of time, the risks averages to a great extent. Only invest in these funds if you have a long-term investment horizon.
Since banking sector funds are highly risky, they are suitable for aggressive investors. Thus, invest in the sector if you have high-risk tolerance levels. To limit the associated risks to a large extent, a long-term investment horizon is a must. Investing in these funds allows you to gain exposure to a portfolio of the best-performing banking and financial sector stocks. Moreover, keeping your investments below 10% across sector mutual funds is advisable.
Since banking funds are sector funds, their portfolio heavily invests across the banking and financial services industry, making it a high-risk investment. These funds heavily invest across the banks, NBFCs and other financial institutions. As a result, the portfolio will have high exposure to a single sector. Not all stocks perform well all the time. Therefore, it is a must to ensure the fund’s portfolio is well diversified.
The Banking industry is performing well right now and has good growth prospects. However, that doesn’t ensure the growth cycle is permanent. Markets, businesses and industries move in cycles. Thus, if you are an investor who has a thorough understanding of the banking and financial services sector and is willing to take on the volatility, you may consider investing in banking sector mutual funds.
The Indian banking system comprises 12 public sector banks, 22 private sector banks, 46 foreign banks, 11 small finance banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks and also cooperative credit institutions.
Despite global turmoil, India’s banking industry has historically been among the most stable in the world. The government has made a concerted effort to promote financial inclusion through a variety of measures aimed at bringing the country’s underbanked population into the banking system.
The government-mandated an open API policy known as India Stack as part of the Digital India initiative, allowing third-party providers access to proprietary software for five key programmes: Aadhaar, e–signing, e–KYC, UPI and privacy-protected data sharing.
As of 2020, Indian banks’ capital adequacy remained above regulatory limits, with the RBI lowering the leverage ratio allowing banks to increase lending.
Innovative banking concepts such as payments and small finance banks have lately been introduced in the Indian banking market. The RBI’s new policies focus on assisting the domestic banking industry’s reform.
The need for financial products has increased as the corporate environment has become more dynamic. Banks are adopting novel financial products and enhanced risk management techniques to gain market share.
Due to the government’s ongoing efforts to promote banking technology and expand into unbanked and metropolitan areas, access to the banking system has improved over time. The Jan Dhan Yojana is a financial inclusion programme established by the Ministry of Finance in 2014. The program aims to increase affordable access to financial services such as bank accounts, credit, insurance, and pensions in all sections of India.
Indian Central Bank and Singapore banks have announced plans to integrate their digital payment systems by July 2022, allowing for quick and low-cost financial transactions.
Source: IBEF and InvestIndia
