Bandhan Gilt Fund has outperformed its category peers, recording a 5.7% one-year return as of August 2026. This performance places it ahead of funds like ICICI Prudential Gilt Fund and SBI Gilt Fund. While the fund offers zero credit risk due to government backing, investors should consider interest rate sensitivity and the current tax treatment of debt funds before making allocation decisions.
Bandhan Gilt Fund has secured the top spot in the short and mid-term gilt mutual fund category, delivering a 5.7% one-year return as of early August 2026. This performance sets it ahead of major competitors like ICICI Prudential Gilt Fund, which recorded 4.1%, and SBI Gilt Fund, which registered a 2.8% return for the same period. The comparison includes funds with assets under management of at least ₹1,500 crore.
Beyond the one-year figures, Bandhan Gilt Fund has also shown a three-year return of 7.4%. The fund has consistently outperformed its benchmark, beating it by 3.8 percentage points over the last year. This consistency often highlights the impact of the fund manager's active approach to managing the portfolio's duration and interest rate bets.
For investors, it is important to understand what a gilt fund does. These funds invest primarily in government-backed securities. This structure eliminates credit risk, meaning there is virtually no danger of the government defaulting on interest or principal payments. However, these funds are highly sensitive to interest rate fluctuations. When interest rates rise in the economy, bond prices typically fall, which can pressure the fund's net asset value. Conversely, when rates fall, bond prices tend to rise, which can benefit the fund.
Because of this sensitivity, performance in gilt funds is often driven by how well the fund manager anticipates changes in the Reserve Bank of India’s interest rate policy. An investor looking at these funds must be prepared for volatility in the fund's unit price, even though the underlying security is safe from a credit perspective.
Another key factor for investors is the tax treatment. Under current Indian tax laws for units acquired on or after April 1, 2023, gains from gilt funds are taxed at the investor's individual income tax slab rate. This is different from equity funds or older debt fund structures that might have offered lower tax rates. As a result, the post-tax return of the fund will depend largely on the investor's personal income level.
Moving forward, the primary monitorable for investors will be the interest rate cycle. Since gilt funds are essentially interest rate plays, any central bank commentary on rates will influence how these funds perform. Investors may also track the fund’s average maturity profile in upcoming monthly fact sheets to understand how the manager is positioning the portfolio relative to expected interest rate changes.