Published May 22, 2026 4 Min Read

Copy Link

Introduction

An accrual strategy in debt funds aims to generate returns mainly through interest earned on bonds, rather than from frequent buying and selling based on interest rate movements. It is commonly used in corporate bond funds, credit risk funds, and other income-focused debt schemes.

  • Debt funds using an accrual strategy usually hold bonds until maturity to earn coupon interest regularly.
  • Accrual vs duration strategy: accrual focuses on interest income, while duration strategy focuses on gains from interest rate changes.
  • SEBI requires all mutual funds to display a colour-coded riskometer ranging from Low to Very High risk.
  • Yield to maturity (YTM) shows the expected annual return if the bond portfolio is held until maturity.
  • You can start a SIP investment from Rs. 100 per month on the Bajaj Broking website.
  • KYC is mandatory before investing in any mutual fund scheme as per SEBI regulations.

Start your mutual fund investment journey on the Bajaj Broking website — complete KYC online, compare 4,000+ mutual fund schemes, and begin a SIP from Rs. 100 per month.

What is an accrual strategy?


An accrual strategy is a debt fund strategy where the fund manager earns returns mainly through the interest paid by bonds and fixed-income securities. The strategy usually involves holding securities until maturity instead of trading them frequently.

In accrual funds, the focus is on collecting coupon payments over time. These funds may invest in corporate bonds, debentures, certificates of deposit, and other debt instruments.

The return depends largely on:

  • Coupon interest earned from bonds
  • Credit quality of the issuer
  • Yield to maturity (YTM) of the portfolio
  • Holding period of the debt securities

Debt funds using this strategy are generally less sensitive to short-term interest rate changes compared to duration-focused funds.

How does an accrual strategy work?


An accrual strategy works by buying debt securities that offer regular interest payments and holding them until they mature. The fund earns income through the coupon rate paid by the issuer.

For example, if a debt fund buys a 3-year corporate bond paying 7% annual interest, the fund receives regular coupon income during those 3 years. If the issuer repays on time, the fund also receives the principal amount at maturity.

Key parts of the strategy

ComponentWhat it meansWhy it matters
Coupon incomeRegular interest paid by bondsMain source of returns
Yield to maturity (YTM)Expected annual return if held till maturityHelps estimate potential returns
Credit qualityFinancial strength of the issuerHigher risk may offer higher yields
Maturity periodTime left before bond repaymentAffects interest rate sensitivity

An accrual strategy in debt funds may perform better when interest rates are stable or slowly rising. In such conditions, the regular interest income becomes the main return driver.

Accrual strategy vs duration strategy


Accrual and duration are two common debt fund strategies. They differ mainly in how the fund manager aims to generate returns.

FeatureAccrual strategyDuration strategy
Main return sourceInterest income from bondsPrice movement due to interest rate changes
Holding styleUsually hold till maturityActive buying and selling
Interest rate sensitivityLowerHigher
Risk levelModerate, based on credit qualityHigher market risk from rate changes
Suitable forInvestors seeking stable incomeInvestors expecting falling interest rates

A duration strategy tries to benefit when bond prices rise after interest rates fall. This can increase returns, but it can also increase volatility if rates move unexpectedly.

SEBI requires debt funds to display a riskometer showing risk levels such as Low, Moderate, High, or Very High. You should always check the riskometer before investing.

What are the benefits and risks of an accrual strategy?


An accrual strategy can offer more predictable income compared to highly rate-sensitive debt strategies. However, it still carries risks linked to credit quality and market conditions.

Benefits of accrual funds

  • Regular coupon income can support relatively stable returns.
  • Lower sensitivity to short-term interest rate changes.
  • Suitable for medium-term investment goals.
  • Yield to maturity can help estimate expected portfolio returns.

Risks of accrual funds

  • Credit risk: bond issuers may delay or default on payments.
  • Liquidity risk: some debt securities may be difficult to sell quickly.
  • Interest rate risk still exists, though usually lower than duration funds.
  • Returns are market-linked and not guaranteed.

You should review the fund’s portfolio quality, maturity profile, and riskometer before investing in accrual-based debt funds.

Who should consider accrual-based debt funds?


Accrual-based debt funds may suit you if you want relatively stable income and can stay invested for the medium term. They are often considered by investors who want lower volatility than many equity funds.

You may consider accrual funds if you:

  • Want regular income from debt investments
  • Prefer lower interest rate sensitivity
  • Have an investment horizon of 2 to 4 years
  • Understand credit-related risks in debt funds

These funds may not suit you if you expect sharp interest rate cuts and want to benefit mainly from bond price appreciation through a duration strategy.

On the Bajaj Broking website, you can compare debt fund categories, track your portfolio through the Dashboard and MF Profile sections, and invest through SIP or lumpsum modes.

Conclusion

An accrual strategy in debt funds focuses on earning interest income by holding bonds until maturity. Compared to a duration strategy, it is usually less affected by short-term interest rate changes but still carries credit and liquidity risks.

Before investing, check the fund’s yield to maturity, portfolio quality, expense ratio, and SEBI riskometer. You can explore 4,000+ mutual fund schemes on the Bajaj Broking website and start investing with SIPs from Rs. 100 per month after completing KYC.

Frequently asked questions

What is an accrual strategy?

An accrual strategy is a debt fund strategy where returns mainly come from the interest earned on bonds and fixed-income securities. The fund manager usually holds the securities until maturity instead of trading frequently. In accrual strategy in debt funds, yield to maturity (YTM), coupon income, and issuer credit quality are important factors affecting returns. Returns are market-linked and depend on the issuer making timely payments.

What is the duration strategy?

A duration strategy is a debt fund approach that aims to benefit from changes in interest rates. When interest rates fall, bond prices may rise, which can increase fund returns. Duration-focused funds are generally more sensitive to market movements than accrual funds. On the Bajaj Broking website, you can compare debt fund categories and review the SEBI-mandated riskometer before investing.

Who should invest in accrual funds?

You may consider accrual funds if you want relatively stable income and can stay invested for around 2 to 4 years. These funds may suit investors looking for lower interest rate sensitivity compared to duration-based debt funds. Before investing, complete your KYC process as required by SEBI and review factors such as credit quality, yield to maturity, and expense ratio carefully.

Show More Show Less

Related Articles

Article 1

Read More

 Article 2

Dearness Allowance (DA)

Read More

 open-ended-vs-close-ended-fund 3

NIFTY Next 50 Index

Mar 26, 2024

Read More

 Article 4

Read More

Related Videos

Important things NRIs must know before investing in India
 
 

Important things NRIs must know before investing in India

10 key steps to secure your child's financial future
 
 

10 key steps to secure your child's financial future

How to invest in ELSS Funds?
 
 

How to invest in ELSS Funds?

Types of equity funds
 
 

Types of equity funds

Home > Investments > Mutual Funds > Accrual Strategy

Related Links

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form.

(ii) carry customized/personalized suitability assessment.

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.

Download app image