Banking & PSU debt (BPSU) funds invest at least 80 percent of the money in bonds issued by banks, PSUs and public financial institutions. Some schemes holding medium-term bonds offered low returns as interest rates climbed up.

Things may however change as the interest rates may peak in next six months. Average yield to maturity of BPSU funds stands at an attractive 7.15 percent as on August 30. As interest rates are expected to inch up further investors are selling BPSU funds. In September, BPSU funds saw net redemptions of Rs 4,225 crore and total assets under management stood at Rs 77,677 crore.