India Corporate Bond Funds Log Highest Inflows in Over 2 Years

Corporate bond mutual funds in India recorded their strongest inflow in 26 months in May 2025, drawing ₹11,983 crore, according to data released by the Association of Mutual Funds in India (AMFI). This is the highest monthly inflow since March 2023.

Banks Lead Allocations Amid Surplus Liquidity

As per AMFI data, the inflows were largely attributed to banks deploying excess liquidity into company debt instruments. These funds primarily invest in corporate bonds rated AA+ and above. The Reserve Bank of India’s recent liquidity support, including a 50 basis point repo rate cut and a reduction in the cash reserve ratio from 4% to 3%, added about ₹2.5 lakh crore into the banking system. This environment encouraged short-term tactical allocations.

Debt Fund 

While corporate bond funds saw net inflows, the overall debt mutual fund category witnessed a net outflow of ₹15,908 crore in May. Liquid funds saw the sharpest exit at ₹40,205 crore, followed by overnight funds ₹8,120 crore and floater funds ₹254 crore. Credit risk funds and medium-duration funds saw smaller outflows of ₹247 crore and ₹47 crore, respectively. 

Read More: Foreign Investment in Indian Corporate Bonds Soars To Decade High in May!

Corporate Bond AUM Rises

Assets under management (AUM) in corporate bond funds stood at ₹1.96 lakh crore in May, up from ₹1.71 lakh crore in December 2024, a growth of 14.5% year-to-date.

Conclusion

May marked a 2nd straight month of inflows into corporate bond funds, driven by system liquidity and short-term interest in higher-rated debt instruments. Broader debt categories, however, saw mixed flows during the same period.

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