Onwards and upwards: A positive outlook for private credit in India

The Indian private credit market reaches at US$9.0 billion in the first six months of 2025.

In brief

• The economic landscape in 2025 reflects resilient fundamentals and improving financial stability in India. However, sustaining momentum will require stronger policy transmission and better navigation of private and external risks.
• Private credit investments reached US$9.0 billion across 79 deals (above US$ 10 million) in H1 2025, driven by one large transaction and stronger participation in value terms by global funds.
• The EY Private Credit Pulse survey revealed a rapidly maturing market with increased sophistication across deployment strategy, risk management and capital sourcing. Majority of respondents expect deals to increase over the next 12 months due to buoyant economic activity. 

Macroeconomic Outlook 2025 and Monetary Policy

Global growth projections for 2025 have been slightly downgraded due to geopolitical tensions, heightened US tariffs, and tighter credit, while easing inflation and falling crude prices have created room for cautious monetary easing boosting India’s growth outlook.

GDP growth for FY25 stood at 6.5%, led by robust services and public capex, even as industrial activity and trade lagged. CPI inflation dropped to a six-year low of 2.8% by May, prompting the RBI to initiate a cautious rate cutting cycle, bringing the repo rate to 5.5% by June 2025. Indicators point to a more nuanced growth trajectory one supported by robust services and fiscal prudence but constrained by muted industrial output, weakening credit growth, and external uncertainties.

Bank credit growth decelerated to 11% YoY in FY25 from 20.2% in FY24, reflecting conservative underwriting and delayed monetary transmission. Despite this, NBFCs saw improved lending momentum, aided by the RBI’s rollback of risk weights and CRR cuts. Lending to MSMEs and services showed resilience, while corporate lending remained subdued. Lending growth to the large corporate industries has moved up by ~6% in the past two years, whereas the MSME sector has been robust if compared to pre-COVID levels. Unsecured retail segments continued to pose asset quality risks, though system-wide capital buffers remained strong.

With inflation under control and fiscal policy supportive, the outlook for H2 2025 remains positive. However, a durable recovery will depend on how effectively rate cuts feed through to the real economy, the revival of private capex, and India’s ability to manage external volatility. Private credit may well be a key enabler in bridging the funding gaps ahead.

Private credit deal flow in India for H1 2025

In this supportive backdrop, India’s private credit market saw a sharp surge in deal activity. Total private credit deployment touched US$9.0 billion across 79 deals (above US$ 10 million) in H1 2025, a 53% rise over H1 2024 and nearly 3x of H2 2024 levels. However, a single landmark deal Shapoorji Pallonji Group’s US$3.14 billion made a huge percentage of the total deal amount. Excluding this, deal flow still reflected healthy momentum, driven by stable interest rate expectations and gaps left by banks in sectors like infrastructure and real estate. Global funds remained the dominant players in the private credit market, while domestic funds focused on mid-market and opportunistic deals.

The infrastructure sector got the highest allocation from the private credit funds followed by the real estate and healthcare sectors. Larger deals over US$100 million accounted for 18% of deal volume in H1 2025 vis-à-vis 13% in CY 2024. Consistent with recent trends, H1 2025 saw continued credit activity from mutual funds, NBFCs, and foreign banks, especially in the sub-18% structured credit segment.

Several Indian investment funds are launching private credit funds to support mid-sized and growth-oriented businesses. National Investment and Infrastructure Fund (NIIF) plans to raise $2 billion to attract global capital, while Motilal Oswal, Prabhudas Lilladhar, and Vivriti Asset Management are collectively targeting over $600 million through new funds focused on performing credit and mid-market investments.

Blackstone Group and Bandhan AMC are launching new investment platforms, Blackstone plans a retail-focused credit fund with limited quarterly redemptions and Bandhan’s Vedartha will offer AIF and PMS products. 

Summary

In H1 2025, India’s central bank batted on the front foot by infusing liquidity, a 50 bps cut in policy rates and changing prudential norms to facilitate lending to infrastructure and NBFC sectors. As of early August 2025, CPI forecast continues to be benign, it is likely that interest rates may head further lower during the year. Indian economy continues to grow around the 6.5% per annum rate amidst global macro-economic turmoil, while at the same time strengthening the fiscal position.

In H1 2025, the private lending market saw US$9.0 billion worth of transactions, marking a 53% increase from US$5.9 billion in H1 2024. Of this a large deal worth US$3.1 billion was raised by Shapoorji Pallonji Group in late May 2025. Further, domestic funds led in deal participation whereas global funds continued to drive the majority of capital inflows into Indian market.

Our July 2025 Private Credit Pulse survey highlights a maturing market and bullish investor sentiments, despite rising competition.