In today’s changing interest rate environment, many investors are looking for smart and safe options to grow their money. One such option is Floating Rate Funds, which are becoming popular in India, especially when interest rates are rising.
These funds invest in bonds and securities where the interest income changes based on market conditions, giving you better returns when rates go up.
In this article, we will explain everything about Floating Rate Funds in simple words – what they are, how they work, their benefits, and most importantly, the best floating rate funds to invest in 2025. Whether you are a beginner or a regular mutual fund investor, this guide will help you understand if floating rate funds are right for you.
Overview of Contents
Best Floating Rate Funds List
| Fund Name | AUM (₹ Cr) | NAV (₹) | Minimum SIP (₹) |
|---|---|---|---|
| Bandhan Floating Rate Fund | 312.55 | 12.75 | 500 |
| DSP Floating Rate Fund | 928.40 | 13.10 | 100 |
| SBI Floating Rate Debt Fund | 1,248.20 | 13.20 | 1,000 |
| UTI Floater Fund | 1,415.60 | 1,489.90 | 500 |
| Kotak Floating Rate Fund | 4,105.00 | 1,450.65 | 100 |
| Nippon India Floating Rate Fund | 7,795.80 | 45.25 | 100 |
| ICICI Prudential Floating Interest Fund | 8,980.10 | 439.60 | 100 |
| Aditya Birla Sun Life Floating Rate Fund | 12,690.70 | 339.80 | 1,000 |
| HDFC Floating Rate Debt Fund | 15,210.00 | 48.10 | 100 |
| Franklin India Floating Rate Fund | 337.80 | 42.10 | 500 |
1. Bandhan Floating Rate Fund
Bandhan Floating Rate Fund is a lesser-known but stable floater fund. It mainly invests in short-term debt instruments with floating interest rates, which helps in adjusting returns as interest rates change in the market. With an AUM of ₹312.55 crore and NAV of ₹12.75, this fund is suitable for conservative investors who want low risk and better returns than traditional fixed deposits. The minimum SIP amount starts at ₹500, making it a good option for small investors.
2. DSP Floating Rate Fund
DSP Floating Rate Fund is ideal for those looking to park their money in a low-risk investment option with some returns. This fund avoids long-term bonds and focuses more on floating-rate instruments to benefit from rising interest rates. With ₹928.40 crore in assets and a NAV of ₹13.10, it is considered a moderately safe fund. You can start investing in this fund with just ₹100 through SIP.
3. SBI Floating Rate Debt Fund
SBI Floating Rate Debt Fund is backed by the strong reputation of SBI Mutual Fund. It holds a diversified portfolio of debt securities that are linked to market interest rates. This fund is suitable for investors who are looking for short-term investments with stable returns. The fund has an AUM of ₹1,248.20 crore and a NAV of ₹13.20. It requires a SIP investment starting from ₹1,000.
4. UTI Floater Fund
UTI Floater Fund is known for its quality portfolio and consistent performance. The fund invests in high-rated floating rate debt papers, reducing risk while offering decent returns in changing interest rate environments. With ₹1,415.60 crore in AUM and a NAV of ₹1,489.90, it is a strong contender in the floating rate fund category. The minimum SIP amount is ₹500.
5. Kotak Floating Rate Fund
Kotak Floating Rate Fund is one of the most popular floater funds due to its consistent track record and strong management. It invests in floating rate bonds and money market instruments, aiming to provide better returns as interest rates rise. With an AUM of ₹4,105 crore and NAV of ₹1,450.65, it is suitable for risk-averse investors. SIPs start from as low as ₹100.
6. Nippon India Floating Rate Fund
Nippon India Floating Rate Fund offers stability and decent returns by investing mainly in short-term floating rate instruments. It is suitable for investors who want to protect their investment from interest rate volatility. With assets under management of ₹7,795.80 crore and NAV of ₹45.25, this fund allows SIP investments from ₹100 onwards.
7. ICICI Prudential Floating Interest Fund
ICICI Prudential Floating Interest Fund is a well-managed floater fund that has delivered consistent returns over time. It mainly invests in floating rate debt securities and money market instruments. With an AUM of ₹8,980.10 crore and NAV of ₹439.60, it’s a suitable option for conservative investors. SIPs can begin from just ₹100.
8. Aditya Birla Sun Life Floating Rate Fund
This fund is among the largest in the category, with ₹12,690.70 crore in AUM. Aditya Birla SL Floating Rate Fund focuses on providing reasonable returns while keeping risk low. It invests mostly in high-quality floating-rate bonds. The NAV is ₹339.80, and the minimum SIP investment is ₹1,000, which makes it ideal for serious long-term investors.
9. HDFC Floating Rate Debt Fund
HDFC Floating Rate Debt Fund is the most popular fund in this category, with the highest AUM of ₹15,210 crore. It is known for its low expense ratio and steady performance. The fund primarily invests in floating-rate securities and offers low risk with moderate returns. Its NAV stands at ₹48.10, and SIPs can be started with ₹100. It’s a good choice for investors looking for short-term parking with flexibility.
10. Franklin India Floating Rate Fund
Franklin India Floating Rate Fund is a small-sized fund with ₹337.80 crore in AUM but offers a solid track record in conservative debt investing. It invests in quality floating rate bonds and money market instruments. The NAV is ₹42.10 and minimum SIP amount is ₹500. It is suited for investors who want a small but steady exposure to debt instruments.
Features of the Best Floating Rate Mutual Fund in India
Floating rate mutual funds are a good choice for investors who want stable returns with lower risk. One of the biggest benefits is that these funds have lower interest rate risk. This means they change their interest rates based on the current market, so if interest rates go up, the fund can adjust and protect your investment better than fixed-rate options. They also offer good liquidity, meaning you can withdraw your money easily whenever needed.
This is helpful for people who may need funds in emergency or short notice. These funds usually have diversified portfolios — they invest in many different debt instruments like corporate bonds, government securities, and other floating rate assets. This variety reduces risk and can give more balanced returns. Also, these funds have the potential to give attractive returns especially when interest rates are rising in the economy. Since the returns move along with the market rates, it can be a smart choice for income-focused investors.
Overall, floating rate mutual funds are a good and balanced option for Indian investors who want safety, flexibility, and decent returns. They are best suited for medium-term goals and especially useful during uncertain interest rate times.
Top Floating Rate Mutual Funds Based on Expense Ratio
If you’re planning to invest in floating rate mutual funds, one key factor to consider is the expense ratio, which affects your overall returns. A lower expense ratio means lower costs for managing the fund, which can help improve your profits over time. Below is a list of some of the top floating rate funds in India ranked from lowest to highest expense ratio, along with their minimum SIP investment
| Mutual Fund Name | Expense Ratio (%) | Minimum SIP (₹) |
|---|---|---|
| Kotak Floater Fund | 0.24 | 100 |
| DSP Floating Rate Fund | 0.24 | 100 |
| Franklin India Floater Debt Fund | 0.24 | 500 |
| SBI Floater Debt Fund | 0.26 | 1,000 |
| HDFC Floating Rate Fund | 0.26 | 100 |
| Tata Floater Debt Fund | 0.30 | 500 |
| Bandhan Floating Rate Fund | 0.30 | 100 |
| Nippon India Floater Fund | 0.31 | 100 |
| UTI Floating Rate Fund | 0.43 | 500 |
| ICICI Prudential Floating Rate Fund | 0.56 | 100 |
Best Floating Rate Mutual Funds with Strong 3-Year CAGR Performance
| Mutual Fund Name | 3Y CAGR (%) | Minimum SIP (₹) |
|---|---|---|
| Axis Floating Rate Fund | 7.08 | 1,000 |
| Franklin India Floater Fund | 6.82 | 500 |
| ICICI Pru Floating Interest Fund | 6.71 | 100 |
| HDFC Floating Rate Fund | 6.57 | 100 |
| DSP Floater Fund | 6.50 | 100 |
| SBI Floating Rate Debt Fund | 6.47 | 1,000 |
| Aditya Birla SL Floating Rate Fund | 6.42 | 1,000 |
| Tata Floating Rate Debt Fund | 6.37 | 500 |
| Bandhan Floating Rate Fund | 6.20 | 100 |
| Nippon India Floating Rate Fund | 6.15 | 100 |
Historical 5-Year Performance of Top Floating Rate Mutual Funds
| Mutual Fund Scheme | 5Y CAGR (%) | Minimum SIP (₹) |
|---|---|---|
| ICICI Prudential Floating Interest Fund | 7.44 | 100 |
| Nippon India Floating Rate Fund | 7.15 | 100 |
| Kotak Floating Rate Fund | 7.05 | 100 |
| HDFC Floating Rate Debt Fund | 6.99 | 100 |
| Aditya Birla Sun Life Floating Rate Fund | 6.67 | 1,000 |
| Franklin India Floating Rate Fund | 6.54 | 500 |
| UTI Floater Fund | 6.28 | 500 |
Key Advantages of Floating Rate Mutual Funds
Floating rate mutual funds offer several benefits, making them a smart choice for debt investors. They help reduce interest rate risk by adjusting returns with changing market rates. These funds can deliver higher yields in rising rate environments and provide diversified exposure to instruments like corporate and government bonds. Additionally, they offer high liquidity, allowing investors to easily access their money when needed.
Risks of Floating Rate Mutual Funds
While floating rate mutual funds have many benefits, they also come with some risks. Credit risk means the companies or bonds in the fund might not repay on time. Market risk can cause the fund’s value to go up or down due to economic changes. Interest rate risk may lower returns if rates start falling. Lastly, liquidity risk means the fund may hold some investments that are hard to sell quickly in bad market conditions. Investors should know these risks before investing.
Conclusion
Floating rate mutual funds are a smart option for investors who want to earn steady returns while managing interest rate risks. These funds adjust their interest payouts with market rates, making them a good choice during rising rate periods. With benefits like diversification, liquidity, and the potential for higher income, they can add value to your portfolio. However, it’s important to understand the risks like credit and market volatility. By choosing well-performing funds and aligning them with your financial goals, floating rate mutual funds can be a useful tool for stable and flexible investing in 2025 and beyond.