scripbox logo
  • right-arrow
  • Mutual Funds
    right-arrow
  • Credit Risk Funds

Credit Risk Funds

Invest in the best credit risk funds recommended by Scripbox that are algorithmically selected that best suit your needs

long term funds

Long Term Wealth

Top equity mutual funds for long-term goals

5+ years

short term funds

Short Term Money

Best debt mutual funds for short term investing

1-5 years

tax saving funds

Tax Saver Plan

Top ELSS funds to save tax the smart way

Lowest lock-in

emergency funds

Emergency Money

Top liquid funds for life's surprise expenses

Under 1 year

equity-funds

See all equity funds

Top Equity mutual funds for long-term growth

Filters

Reset Filters1

Scripbox Opinion

Fund Category

EquityDebtHybridInternational EquitySolution Oriented

Minimum Investment

500+

Fund House

See 40 other fund houses

Show advanced filters

List of Credit Risk Mutual Funds

Sort by

Credit Risk

close
Kotak Credit Risk Fund (G)

Kotak Credit Risk Fund (G)

Credit Risk

₹ 1,784 Cr

Fund Size

7.20%

3 Year CAGR

3 Y CAGR

ICICI Prudential Credit Risk Fund (G)

ICICI Prudential Credit Risk Fund (G)

Credit Risk

₹ 7,625 Cr

Fund Size

8.70%

3 Year CAGR

3 Y CAGR

HDFC Credit Risk Debt Fund (G)

HDFC Credit Risk Debt Fund (G)

Credit Risk

₹ 7,783 Cr

Fund Size

9.00%

3 Year CAGR

3 Y CAGR

Axis Credit Risk Fund (G)

Axis Credit Risk Fund (G)

Credit Risk

₹ 692 Cr

Fund Size

6.50%

3 Year CAGR

3 Y CAGR

Baroda Credit Risk Fund Plan A (G)

Baroda Credit Risk Fund Plan A (G)

Credit Risk

₹ 199 Cr

Fund Size

5.00%

3 Year CAGR

3 Y CAGR

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (RIDCW-A)

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (RIDCW-A)

Credit Risk

₹ 7,625 Cr

Fund Size

6.60%

3 Year CAGR

3 Y CAGR

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-M)

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-M)

Credit Risk

₹ 1,784 Cr

Fund Size

5.40%

3 Year CAGR

3 Y CAGR

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-Q)

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-Q)

Credit Risk

₹ 1,784 Cr

Fund Size

6.00%

3 Year CAGR

3 Y CAGR

Axis Credit Risk Fund Reinvst of Inc Dis cum Cap Wdrl (RIDCW-M)

Axis Credit Risk Fund Reinvst of Inc Dis cum Cap Wdrl (RIDCW-M)

Credit Risk

₹ 692 Cr

Fund Size

5.60%

3 Year CAGR

3 Y CAGR

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-A)

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-A)

Credit Risk

₹ 1,784 Cr

Fund Size

5.60%

3 Year CAGR

3 Y CAGR

Achieve Life Goals

Find funds that suit your investment objective
my first crore

My First Crore

retire confidently

Retire Confidently

child-education

Child Education

dream planner

Dream Planner

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-W)

Kotak Credit Risk Fund of Inc Dis cum Cap Wdrl (RIDCW-W)

Credit Risk

₹ 1,784 Cr

Fund Size

5.70%

3 Year CAGR

3 Y CAGR

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (RIDCW-6M)

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (RIDCW-6M)

Credit Risk

₹ 7,625 Cr

Fund Size

7.00%

3 Year CAGR

3 Y CAGR

HDFC Credit Risk Debt Fund Inc Dist cum Cap Wdrl Opt (RIDCW-Q)

HDFC Credit Risk Debt Fund Inc Dist cum Cap Wdrl Opt (RIDCW-Q)

Credit Risk

₹ 7,783 Cr

Fund Size

7.70%

3 Year CAGR

3 Y CAGR

Baroda Credit Risk Fund Plan A Pyt of Inc Dis cum Cap Wdrl (D-Q)

Baroda Credit Risk Fund Plan A Pyt of Inc Dis cum Cap Wdrl (D-Q)

Credit Risk

₹ 199 Cr

Fund Size

4.10%

3 Year CAGR

3 Y CAGR

ICICI Prudential Credit Risk Fund Bonus (PIDCW-A)

ICICI Prudential Credit Risk Fund Bonus (PIDCW-A)

Credit Risk

₹ 7,625 Cr

Fund Size

7.60%

3 Year CAGR

3 Y CAGR

Axis Credit Risk Fund Pyt of Inc Dis cum Cap Wdrl (D-W)

Axis Credit Risk Fund Pyt of Inc Dis cum Cap Wdrl (D-W)

Credit Risk

₹ 692 Cr

Fund Size

5.50%

3 Year CAGR

3 Y CAGR

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (D-Q)

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (D-Q)

Credit Risk

₹ 7,625 Cr

Fund Size

7.30%

3 Year CAGR

3 Y CAGR

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (PIDCW-6M)

ICICI Prudential Credit Risk Fund Inc Dist cum Cap Wdrl (PIDCW-6M)

Credit Risk

₹ 7,625 Cr

Fund Size

7.00%

3 Year CAGR

3 Y CAGR

HDFC Credit Risk Debt Fund Inc Dist cum Cap Wdrl Opt (D-Q)

HDFC Credit Risk Debt Fund Inc Dist cum Cap Wdrl Opt (D-Q)

Credit Risk

₹ 7,783 Cr

Fund Size

7.70%

3 Year CAGR

3 Y CAGR

Baroda Credit Risk Fund Plan A Reinvst of Inc Dis cum Cap Wdrl (RIDCW-Q)

Baroda Credit Risk Fund Plan A Reinvst of Inc Dis cum Cap Wdrl (RIDCW-Q)

Credit Risk

₹ 199 Cr

Fund Size

4.10%

3 Year CAGR

3 Y CAGR

PreviousNext

Explore best mutual funds across categories

Best Mutual Funds

The best performing mutual funds to invest in 2021

Best Equity Funds

The best performing equity mutual funds to invest in 2021.

Best Debt Funds

The best performing debt mutual funds to invest in 2021

Best ELSS Funds

The best performing ELSS tax saving mutual funds to invest in 2021

Best Liquid Funds

The best performing liquid mutual funds to invest in 2021

Best SIP FundsBest Debt FundsBest Diverisifed FundsBest Mid Cap FundsBest Tax Saver FundsBest Large Cap FundsBest International FundsBest Small Cap FundsBest Short Term FundsBest Index FundsBest Long Term FundsBest Multi Cap Funds
How does Scripbox rate funds?

Proprietary 4-step system to rate mutual funds

We use a proprietary system to rate mutual funds and based on that make a recommendation or rate the fund as top ranked.

What Scripbox recommendations mean?
Scripbox algorithm recommends 2-4 funds for investment for an investment asset class such as large cap, diversified, liquid etc. When you invest for an objective, the algorithm suggests the appropriate asset class and funds.
Track Record

Track Record

We look at consistent and long historical performance for our analysis.

Fund Size

Fund Size

We look at the size of the fund with respect to other funds in the category. Larger funds are preferred.

Sub-asset Class View

Sub-asset Class View

We check if the sub-category of the fund is recommended by us.

Fund Performance

Fund Performance

Consistency of performance over various tenures is analysed for a relative performance stack.

Track Record

Track Record

We look at consistent and long historical performance for our analysis.

Fund Size

Fund Size

We look at the size of the fund with respect to other funds in the category. Larger funds are preferred.

Impact of Interest Rates

Impact of Interest Rates

We check the relative interest rate risk of the sub-category of the fund. Lower the better.

Credit Attractiveness

Credit Attractiveness

We check the credit quality of the underlying instruments present in the fund. Higher the better.

Equity Funds

Debt Funds

How to invest in Credit Risk Funds?

Investing through Scripbox is made easy and paperless. All you need to do is follow the below steps and start investing.

choose long term plan

Choose a plan

Choose a plan to invest to start investingmore...

create account

Create an Account

Create an account with Scripbox through a paperless process, to invest in this fundmore...

invest online

Invest online & transfer

Invest via netbanking, UPI or through an SIP (eNACH mandate).more...

track investments

Track your investments

Track, invest more and withdraw your investments through the Scripbox dashboardmore...

scripmark
The Scripbox Promise

Scripbox has helped over 2500 people become millionaires in the last 9 years

Start Investing Now
fund selection

Fund Selection

You'll never have to worry about what funds to choose. We'll suggest what's best for you.

continuous monitoring

Continuous monitoring & alerts

We will track our recommendations and suggest changes & fund exists whenever required.

call assistance

All week call assistance

Our customer champions are available 7 days a week from 8AM to 8PM.

annual reviews

Annual reviews & rebalances

We review your investments and make course corrections every year to make the best out of your investments

What is credit risk?

Credit risk is the risk associated with the failure of a borrower to repay back the borrowed amount. In other words, it means when a person who took a loan is unable to pay back the same within the stipulated time. Credit risk is often compensated with higher cash flows in terms of returns. A bond with a high credit risk will have a low credit rating and high coupon rates. The interest payments by the borrowers of debt is a reward for the risk taken by the lender or investors.

Lenders often assess the borrower’s credit risk based on the credit history, ability to repay, amount of loan or principal, conditions for the loan and the collateral for the loan. Huge corporates have dedicated teams to analyze the credit risk of borrowers.

However, it gets difficult for individual investors to assess credit risk. In this case, they can follow the rating of various credit rating agencies. Any rating of BBB, A, AA, AAA are of the highest credit quality. The risk of default is very less. Ratings below BBB rating have the highest credit risk. The default rate for these is often high. Hence securities with these bonds have higher coupon rates than securities which don’t have them.

What are credit risk funds?

Credit risk funds are a type of mutual funds that invest in low rated corporate debt (fixed income) securities. They aim to generate higher returns by investing in securities that pay a higher yield than high rated funds. On the other hand, high rated corporate or government securities carry a lower risk.

Credit risk funds require a stable or favourable credit environment to outperform the other debt funds. As per the SEBI guidelines, credit risk funds should invest at least 65% of the assets in papers having ratings below AA+.

The bond ratings improve when the performance of the company increases. In such scenarios, the investors get higher interest rates. Also, when compared to other risk-free debt funds, these funds can generate higher returns.

Credit risk funds in India have fared poorly since 2018, after the IL&FS group default. The debt crisis has become severe with multiple downgrades and defaults by other groups such as Vodafone Idea and DHFL. Since then, the assets under management have fallen from INR 80,000 crore to INR 55,000.

How Does Credit risk Mutual Fund Work?

Credit risk mutual funds in India invest 65% of their assets in securities rated below AA+. These funds generate returns in two ways:

Interest Income: Investors earn interest income on the securities held by the credit risk mutual funds.

Capital Gains: They invest in lower-rated securities, and once the security gets upgraded, the investment earns capital gains.

There are good chances a borrower can default their interest payments, and in such scenarios, the security gets downgraded. This, in turn, has an impact on the fund capital gains. Eventually, the fund manager would not be able to get rid of the security resulting in low performance of the fund.

Who Should Invest in a Credit Risk Mutual Fund?

Since credit risk mutual funds invest in low credit rating securities, they come with a default risk attached to them. Credit risk funds earn from interest payments and capital gains if the underlying security is upgraded. However, there are more instances where the underlying security is downgraded due to its non-repayment of principal and defaulting of interest payments. These funds are very volatile.

From September 2018 credit risk mutual funds in India have been performing poorly. Since then, India is in an economic slowdown with defaults across multiple organizations and various rating downgrades. Covid-19 has only worsened the situation. Many of these funds are unable to meet the redemptions of investors due to low liquidity of these low rated papers.

Due to the high credit risk (default risk) in the category, experts recommend investors to stay away from this category of funds. Even for investors who can absorb the market volatility and have a high-risk tolerance, this isn’t the right time to invest in these funds.

Advantages and Disadvantages of Investing in Credit Risk Funds

Advantages

Higher returns

They invest in low rated securities. The risk involved in these funds is higher than funds investing in high credit rating papers. Hence they come with a premium coupon rate to compensate for the risk taken.

Benefits investors of highest income tax slab

The taxation on returns for short term capital gains is as per the income tax slab rate. However, if the investor stays invested for the long term, the capital gains are taxed at 20% with indexation benefit. Investors of the highest tax bracket (30%) will pay 10% less tax on gains.

Disadvantages

Lack of liquidity

They lack liquidity. These papers, if downgraded, will sit tight on liquidity. It will be difficult for investors to redeem their papers. The current situation in India is the same. Since September 2018, India is facing credit crises due to defaults from major companies. Since then the redemptions are high, but there are no funds with the bond issuer to repay back the loan taken.

High credit risk

They have a risk of defaulting. There can be instances where the papers can be downgraded, leaving investors and borrowers with unpaid bonds. Credit risk funds have underlying securities of rating below BBB. These classes have the highest default rate, thus increasing the risk in the fund.

Don’t suit all investors

Credit risk funds don’t suit all investors. These are high-risk funds, and investors looking for regular and stable income should explore other options. They are only for investors with a high-risk tolerance. However, in the current market scenario, experts recommend investing in diversified funds rather than credit risk funds.

Things to Consider Before Investing

Credit risk funds are high-risk funds. There are chances that the ratings of these funds might downgrade. Therefore they are suitable for investors who are willing to undertake the risk. Following are the things that an investor needs to keep in mind before investing in credit risk funds:

  • In a scenario where the bond in a portfolio fails to improve and defaults, the fund manager faces great difficulty in exiting the security. Therefore, as an investor one needs to be aware of the risk levels associated with these funds.
  • Funds with bigger AUM have a better probability at diversifying the portfolio and spreading the risk. Hence, investors should consider funds from the fund house with larger AUM.
  • It is important to invest in a credit risk fund whose portfolio isn’t highly concentrated.
  • A single business group should not have high possessions in the portfolio.
  • The performance of a credit risk fund highly depends on the portfolio manager and the fund house. It is important to choose the funds where the portfolio manager has good experience in handling debt portfolios.
  • Choose a credit risk fund with a low expense ratio.

Conclusion

Credit risk is associated with borrowers defaulting payments to the lenders. Credit risk funds invest more than 65% of their assets in securities where default risk is high. They invest in securities rated AA and below. However, to compensate for the risk taken, the coupon rates on these securities tend to be high. Thus making the credit risk fund’s returns higher than other funds. Since September 2018, the category of credit risk funds in India has taken a hit. With defaults from multiple big companies, India has gone into a debt crisis. Moreover, the credit rating of many of these securities has also been downgraded. To add to this, Covid-19 has made the situation even worse.

Therefore in the light of the current situation, Scripbox doesn’t recommend these funds due to the high credit risk.

Explore Funds by Category

Index FundsSmall Cap FundsLong Duration Funds
Equity FundsDynamic Asset Allocation FundsMedium Term Funds
Liquid FundsShort Term FundsSolution Oriented Funds
Large Cap FundsRetirement FundsCredit Risk Funds
Debt FundsDiversified FundsEquity Savings Funds
Tax Saving FundsHybrid FundsDynamic Bond Funds
Mid Cap FundsArbitrage FundsLow Duration Funds
Corporate Bond FundsMoney Market FundsMulti Asset Allocation Funds
Childrens FundsGilt FundsBanking and PSU Funds
Overnight FundsInternational FundsUltra Short Funds
filter-btn
Add Filter