India Inc. is increasingly turning to private credit as the market expands, offering new opportunities for both borrowers and investors. Several factors are driving this surge, making private debt a core component of India's capital ecosystem.
In the first half of 2025, private credit investments in India reached $9.0 billion, a 53% increase compared to the $5.9 billion recorded in H1 2024. This growth also significantly outpaces the volumes seen in the second half of 2024. A notable transaction was the $3.4 billion private credit deal completed by the Shapoorji Pallonji Group in May 2025, which stands as one of the largest of its kind in emerging markets.
Assets under management in the Indian private credit market are estimated at $25–30 billion as of March 2025. While this represents a small fraction of India's GDP (0.6%) and the corporate lending sector (1.2%), the asset class is rapidly growing from a low base. Projections estimate continued growth, with private credit AUM in India expected to reach $60-70 billion by 2028.
Several factors contribute to this expansion. Banks in India have become more cautious due to regulatory constraints, asset quality concerns, and capital adequacy pressures. This has created lending gaps that private credit is stepping in to fill. Private credit offers flexibility in structuring deals and can target underserved borrower segments, such as mid-market companies, infrastructure projects, and non-banking financial companies (NBFCs). The yields, ranging from 14% to 22%, are also appealing to foreign institutions, family offices, and high-net-worth individuals. India's macroeconomic outlook, with a projected growth of around 6.5% and easing inflation, provides a favorable environment for private credit.
Infrastructure has received the highest allocation from private credit funds, followed by real estate and healthcare. Larger deals, exceeding $100 million, accounted for 18% of the deal volume in H1 2025, compared to 13% in 2024. Mutual funds, NBFCs, and foreign banks have consistently been active in the sub-18% structured credit segment. Several Indian investment funds are launching private credit funds to support mid-sized and growth-oriented businesses.
Regulatory developments have also played a role. The Insolvency and Bankruptcy Code of 2016 has boosted investor confidence by reducing resolution times and improving recovery values. Tax reforms in the Finance Bill 2025 have further expanded retail participation. In February 2025, the Reserve Bank of India (RBI) reduced risk weights for bank exposures to NBFCs.
Despite the positive outlook, challenges remain. Legal uncertainties persist. Private credit is still small relative to banking credit. DMI Alternatives recently raised $120 million for its maiden corporate private credit fund, which will target sectors including healthcare, technology, business services, manufacturing, and financial services.
Overall, the Indian private credit market is experiencing significant growth, driven by a combination of factors including bank lending constraints, demand for flexible financing, attractive returns, and regulatory tailwinds. While risks remain, private credit is becoming an increasingly important source of capital for Indian companies.
