5 Best-Performing Debt Funds in India with 5-Year Returns Up to 22%
If stability and strong returns on your money both sound appealing, then 2025’s top-performing debt funds should command attention. While equity investments carry volatility, debt mutual funds offer a more predictable path to growth, making them attractive options for risk-conscious investors. Some of these fund categories—especially credit risk funds—have delivered SIP returns exceeding 20% over the past five years!
Let’s explore five standout performers, what makes them tick, and how to choose one that fits your financial goals.
Top 5 Debt Funds with 5-Year Returns Around 12-22%
| Fund Name | 5-Year SIP XIRR / CAGR | Expense Ratio | Risk Level | Key Strategy |
|---|---|---|---|---|
| Bank of India Credit Risk Fund – Direct Growth | 22.01% SIP XIRR | ~1.1% | High | Focuses on high-yield, lower-rated bonds |
| Baroda BNP Paribas Dynamic Bond Fund – Direct Growth | 18.40% SIP XIRR | 0.7% | Moderate | Opportunistic duration shifts for stability |
| DSP Credit Risk Fund – Direct Growth | 12.28% CAGR | 0.4% | Moderately High | Invests across lower-rated corporate bonds |
| Aditya Birla Sun Life Medium Term Fund – Direct Growth | 12.81% SIP XIRR | 0.83% | Moderate | Quality debt with moderate-term maturity focus |
| HDFC Income Plus Arbitrage Active FoF – Direct Growth | 12.70% SIP XIRR | 0.07% | Low-Moderate | Combines arbitrage and stable debt investments |
Also Read :- 7 Equity Mutual Funds That Doubled Wealth in 3 Years
Comparison Table of Top 5 Debt Funds in 2025
| Fund Name | 5-Year SIP XIRR | AUM (₹ Cr) | Expense Ratio | NAV (₹) | Min. Lump Sum (₹) | Min. SIP (₹) |
|---|---|---|---|---|---|---|
| Bank of India Credit Risk Fund Dir Gr | 22.01% | 105.6 | 1.1% | 12.58 | 5,000 | 1,000 |
| Baroda BNP Paribas Dynamic Bond Fund Dir Gr | 18.40% | 228 | 0.7% | 50.60 | 5,000 | 500 |
| DSP Credit Risk Fund Dir Gr | 15.18% | 208.36 | 0.4% | 54.59 | 100 | 100 |
| Aditya Birla Sun Life Medium Term Fund Dir Gr | 12.81% | 2,744 | 0.83% | 43.80 | 1,000 | 1,000 |
| HDFC Income Plus Arbitrage Active FOF Dir Gr | 12.70% | 1,384 | 0.07% | 43.14 | 100 | 100 |
Why These Funds Performed Strongly
1. High Yield Potential (Credit Risk Approach)
The Bank of India Credit Risk Fund leads with an impressive 22.01% SIP XIRR. By investing in bonds with lower credit ratings, it captures attractive yields—though with higher default risk.
2. Adaptive Duration Strategy
Baroda BNP Paribas Dynamic Bond Fund (18.40%) flexibly adjusts bond maturities according to interest rate movements, balancing returns and capital protection.
3. Highly Affordable with Broad Credit Exposure
DSP Credit Risk Fund delivers solid returns (12.28%) with a minimal expense ratio (0.4%). AUM of ₹208 Cr shows growing investor trust.
4. Stable Medium-Term Focus
Aditya Birla Medium Term Fund (12.81%) invests in better-quality debts with mid-range term structures, offering a step-up in return vs. ultra-safe options.
5. Lowest Cost Alternative
HDFC Income Plus Arbitrage FoF (12.70%) blends arbitrage returns with debt stability—and it does so with a feather-light 0.07% expense ratio —particularly appealing for ultra-conservative investors.
Who These Funds Are Best For
| Investor Goal | Recommended Fund(s) |
|---|---|
| Aggressive SIP returns | Bank of India Credit Risk Fund (22%) |
| Balanced risk-adjusted gains | DSP Credit Risk Fund, Aditya Birla Medium Term Fund |
| Low-volatility more than yield | HDFC Income Plus Arbitrage FoF |
| Interest-rate hedging | Baroda BNP Paribas Dynamic Bond Fund |
Key Considerations (Disclaimers & Risks)
- Credit Risk Alert: Funds like BOI Credit and DSP Credit invest in lower-rated bonds. Defaults and downgrades can impact returns significantly.
- Expense Ratio Impact: Even small differences matter—every 0.1% you save goes directly to your returns.
- Exit Loads: Some funds may impose fees on short-term redemptions. Always check the scheme details.
- Historical Performance ≠ Future Results: Markets evolve—use these stats as guidance, not gospel.
Also Read :- Top 5 ELSS Funds to Save Tax and Boost Wealth in 2025
Final Thoughts
In 2025, debt mutual funds in India are no longer merely safe havens—they can be powerful growth conduits. With returns up to 22%, these top performers bridge the gap between stability and wealth creation. Choose wisely, stay disciplined, and match funds to your unique financial personality. Ready to pick yours?
FAQs
Q1. What are debt mutual funds?
Debt funds invest in fixed income securities like bonds and treasury instruments, offering more stable returns than equity funds.
Q2. Can debt funds deliver over 20% returns?
Yes, select funds like Bank of India Credit Risk Fund have delivered over 22% SIP XIRR in the past 5 years .
Q3. Are credit risk funds safe?
Not always. Credit risk funds can deliver higher yields, but carry elevated risk of defaults or rating downgrades.
Q4. How to choose wisely among debt funds?
Understand your risk appetite and horizon, check 5-year performance, evaluate expense ratio, and assess credit quality.
Q5. Why choose arbitrage or medium-term funds?
They serve as low-volatility options that can still outperform traditional fixed deposits, especially when equity isn’t favourable.
Disclaimer : Mutual fund investments are subject to market risks. The data on returns, SIP XIRR, and fund details mentioned in this article are based on publicly available information as of 2025 and may change over time. Past performance is not indicative of future results. Investors are advised to consult a certified financial advisor before making any investment decisions.
