Mutual fund schemes are required to invest up to 25 basis points (BPS) of their Assets Under Management (AUM) in CDMDF units.
The lack of tax incentive is a clear disadvantage of the RBI initiative
Gilt funds are believed to bear little to no credit risk because the government issues the underlying securities.
If interest rates rise you would need to alter your investment strategies in fixed income since most investors have got used to falling interest rates