SIP and mutual fund interest rate: does either pay interest?

A SIP has no interest rate, and neither does a mutual fund. A SIP is a way of buying units of a mutual fund every month, and what you earn depends on how the fund's NAV moves.

A mutual fund is a pool of money from many people, invested by a professional manager under SEBI rules. Each unit you own is a slice of everything the fund holds. The NAV is the price of one unit. People expect an interest rate on a SIP or a mutual fund because banks sell SIPs. Some fund houses (the companies that manage mutual funds) also carry a bank's name. Neither fact turns a SIP into a bank product. If you are new to SIPs, what a SIP is and how it works is the place to start.

Does a SIP or a mutual fund have a fixed or variable interest rate?

Neither, because a SIP and a mutual fund have no interest rate at all. Interest is what a bank pays you on a deposit. A SIP is not a deposit, and neither is a mutual fund.

Each instalment buys units at that day's NAV. SEBI's rules work the NAV out every day, by dividing the scheme's net assets by the number of units outstanding. Your units rise and fall in value with it, and their value can end up lower than the amount you put in. So calling the return "variable interest" is also wrong. There is no rate to vary. There is a price, and the price moves.

One fund's scheme document lists the SIP as a facility of the scheme. It says the facility "enables the investors to save and invest at regular intervals over a longer period of time".

SEBI's Investor Charter tells investors: "Do not fall for the promise of indicative or exorbitant or assured returns". AMFI's standard risk wording likewise says mutual fund schemes are not assured-return products.

A debt fund, which buys bonds, can look like an exception. Its bonds pay interest to the fund, and that interest is added to the fund's value every day. You don't receive it as interest: it shows up as a rise in the NAV, or as an IDCW payout (a payout from the fund's income or gains, which lowers its NAV) if you chose that option. And when interest rates rise, bond prices may fall, says SEBI's investor website, so the NAV can fall too. How interest rates affect mutual funds covers why.

No mutual fund pays a fixed interest rate. A fixed maturity plan (FMP) is a close-ended debt fund with a fixed end date. It holds bonds that mature around that date, and SEBI bars fund houses and distributors from quoting an expected yield. To weigh a debt fund against a deposit, read debt funds versus fixed deposits.

A bank recurring deposit (RD) is the bank product with a fixed rate. Here is how it differs from a SIP:

The insurer here is DICGC, which insures bank deposits such as savings, fixed, current and recurring deposits. A mutual fund unit is one undivided share in the assets of a scheme. It is not a deposit, so deposit insurance does not cover it.

A Post Office recurring deposit also has a fixed rate. The government sets it each quarter, and it stays fixed for the deposit. To understand that product properly, read what a recurring deposit is. If you want to weigh a deposit against funds, fixed deposit versus mutual funds covers the comparison.

Why do banks advertise SIPs?

Banks sell SIPs as agents of fund houses, not as their own deposit products. RBI calls this "agency business". A bank or its group entity acts as an agent of another company that provides the product, "without risk participation". In plain words, the bank sells the fund but does not take the investment risk.

RBI's rules add that a bank must not carry on mutual fund business inside the bank itself. It has to go through a separate group entity.

The selling side has its own rules. SEBI's rules bar a fund house from dealing with a seller of its units who has not cleared the NISM certification exam. A distributor is a registered intermediary that helps you buy and manage funds. Distributors carry an AMFI Registration Number (ARN), shown on the application form. Koshex holds ARN-154632.

Some fund houses carry a bank's name. A sponsor is the person who sets up a mutual fund. SBI Mutual Fund's own documents say it is sponsored by State Bank of India. They also say it is a trust with its own trustee company, SBI Mutual Fund Trustee Company Private Limited. The trustee holds the money and investments for unitholders and oversees the fund house.

So an "SBI SIP" is a SIP in a scheme of SBI Mutual Fund, and an "SBI mutual fund interest rate" is that scheme's return. The fund is a separate trust run by its own fund house and trustee. Its schemes' returns are the scheme's returns, not the bank's.

"PNB SIP" is another popular search. AMFI's NAV file listed 54 mutual funds on 30 September 2026, and none is named after Punjab National Bank. A "PNB SIP" can therefore only be a SIP in some fund house's scheme.

Your SIP money goes from your bank account straight to the fund, not into a bank deposit. A distributor such as Koshex never holds it.

Which bank gives the highest SIP interest rate?

None, because no bank sets a SIP's return. The scheme you pick and how long you stay invested do.

A bank that sells you a SIP is an agent. The return belongs to the scheme, and the scheme belongs to a fund house. To look at schemes instead of banks, start with the mutual funds on Koshex. Equity funds, which invest in shares of companies, have their own page under equity funds.

What is the rate in a SIP calculator?

It is an assumption you type in.

Koshex's SIP calculator asks you to choose a return rate, and you are the one choosing it. Treat the result as an illustration, not a forecast.

For context, AMFI sets rules for fund houses, its members, on the illustrations they publish. Such an illustration must use a return rate AMFI has prescribed, and it may not show a higher one. The prescribed rates are a CAGR. That is the average yearly growth rate over a period, as if the fund had grown at the same pace every year. Each is the average of 10-year periods from June 2014 to May 2024:

• Nifty 50, an index (a list of companies picked by fixed rules): 12.42% a year.
• Nifty 500: 12.80% a year.
• CRISIL Composite Bond Index, for debt funds that lend to governments, banks or companies: 7.85% a year.

These are AMFI's rules for fund houses. They describe how past periods were averaged for illustrations. They are not a rate anyone pays you.

A worked example with made-up NAVs

The NAVs here are hypothetical, chosen only to show the mechanism.

Say a SIP instalment of ₹3,000 goes in when the NAV is ₹60. The instalment divided by the NAV gives 50 units, leaving stamp duty aside. A month later:

• If the NAV is ₹54, your 50 units are worth ₹2,700.
• If the NAV is ₹66, your 50 units are worth ₹3,300.

Nobody fixed a rate at any point. The same 50 units were worth less or more because the price moved. To see how growth builds up over the years, read the power of compounding.

How do you work out what your SIP has actually earned?

Multiply the units you hold by today's NAV, then compare the result with the amount you have invested. Gains or losses show up in that gap.

In the example above, 50 units at a NAV of ₹66 are worth ₹3,300 against ₹3,000 invested. At ₹54 the same units are worth ₹2,700, which is ₹300 less than you put in. Every instalment buys its own units at its own NAV, so a real SIP repeats this sum across many purchases.

A fund's CAGR over a stated period is history for those dates. It is not a rate your SIP will earn. A fund's "per annum" return is the same: AMFI shows scheme returns as a CAGR for 1, 3, 5 and 10 years and since launch. A lender does charge interest on a loan against mutual funds, but that is a loan, not a return.

For more on how returns are measured, see absolute return versus CAGR and how SIP returns are measured.

What should you look at instead of an interest rate on a SIP or fund?

Look at the fund itself: its category, its riskometer, your own time horizon and its past record.

• Category: SEBI's label for what a fund may hold. It tells you where your money can go.
• Riskometer: the risk label SEBI makes every fund show. It has six levels: Low, Low to Moderate, Moderate, Moderately High, High and Very High. It is evaluated monthly and disclosed within 10 days of month-end, so it can change.

Koshex, as a distributor, helps you choose a fund that suits your goal and timeline. It also reviews your holdings over time and flags changes, such as a fund's category or risk shifting.

For the risk side in more depth, see is a SIP safe. For matching a fund to a goal, how to choose the right mutual fund lays out the factors.