Private credit in India has moved from a niche, distress-led pool of capital to a mainstream financing route for otherwise healthy, well-run businesses. For promoters and CFOs, the useful question is no longer whether private credit is legitimate, but where it fits alongside existing bank and NBFC lines.
The scale of the market
India's private-credit market reached roughly USD 25 billion in assets under management by the end of 2025, while annual transaction value crossed USD 11 billion, according to Moody's Ratings. Deployment in H1 2026 was USD 3.5 billion, down 61% year-on-year from USD 9 billion; however, EY notes that the earlier period included one USD 3.1 billion transaction. H1 2026 was marginally above the USD 3.4 billion deployed in H2 2025.
The borrower read-through is straightforward: this is a maturing but cyclical market, sensitive to macro volatility, deal pipelines and fundraising cycles—not a permanently open tap. It also retains headroom: private credit remains a small part of Indian GDP and overall corporate lending compared with more mature markets.
Where the capital is going
Real estate remains the largest destination. EY reported that it represented 35% of H1 2026 deployment. Infrastructure, utilities and promoter-level financing—refinancing, liability management and stake acquisitions—also absorb meaningful capital.
This concentration tells borrowers where funds have built underwriting depth and may be most competitive on turnaround and structure. Outside those categories, a mid-market business seeking conventional growth capital may still find a bank or NBFC facility simpler and cheaper.
Who's writing the cheques
The lender base is more domestic than the “global private credit fund” narrative suggests. Domestic funds accounted for 74% of deployed value and about 79% of deal count in H1 2026, according to EY. The wider universe spans domestic AIFs, global funds, structured-credit NBFC desks and family offices, each with different ticket sizes, risk appetites, covenants and exit expectations.
Why it exists alongside banks and NBFCs
Private credit competes primarily on speed, structuring flexibility and appetite for complexity—not on headline cost. It becomes relevant for time-sensitive, event-driven or complex credits, businesses without conventional security, and leverage levels that regulated-lender frameworks do not accommodate. A business that can wait for a standard sanction cycle and fits a conventional lending template will rarely need it.
The regulatory wildcard
On 13 February 2026, the RBI amended its capital-market exposure framework to permit eligible commercial banks to finance strategic acquisitions of equity shares and compulsorily convertible debentures. The framework took effect on 1 April 2026.
Banks may finance up to 75% of acquisition value, leaving at least 25% to the acquirer. The acquirer's consolidated debt-to-equity ratio cannot exceed 3:1 after acquisition; a corporate guarantee is mandatory; and related-party acquisitions are excluded. This should bring lower-cost bank capital into qualifying acquisition finance, while private credit retains transactions that do not fit the eligibility conditions or where speed and flexibility matter more.
The practical takeaway
Private credit is a specific tool for specific situations. It tends to fit when:
- The requirement is time-sensitive and a conventional sanction cycle does not work.
- The transaction is structurally complex, such as a promoter buyout, related-party acquisition or bridge.
- Conventional security or credit history makes a bank uncomfortable although cash flows are sound.
- Speed and structuring flexibility are worth more than a lower headline cost of capital.
Sources
EY, India private credit H1 2026; Reserve Bank of India, Commercial Banks Directions amendment; Ascertis Credit Group, structural opportunity analysis.
This article reflects market data and regulatory developments as of September 2026. Figures and regulations are subject to change; confirm current information before relying on it for a transaction. This is general information, not financial, investment or credit advice.