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

The Indian private credit market reaches US$12.4 billion in CY 2025 representing 35% growth rate from CY 2024.

In brief

• Despite ongoing global uncertainty and financial risks, the global economy remained steady in H2 2025 due to fiscal support and investment, while India’s economy and financial system stayed strong, supported by domestic demand, stable inflation, sound macroeconomic policies, and healthy balance sheets across banks, NBFCs, and other financial institutions.
• On an aggregate basis, CY 2025 saw US$12.4 billion across 166 transactions, representing 35% growth by value over CY 2024 (approximately US$9.2 billion)
• As per the survey conducted in H2 2025, 84% of the private credit leaders continue to believe that there will be increased competition in the private credit space in India. Further, funds remain bullish on real estate, manufacturing, and renewable energy sectors.

Macroeconomic Outlook 2025 and Monetary Policy

Global growth softened further in H2 2025 amid high public debt, trade frictions, and geopolitical risks, even as easing inflation and lower oil prices allowed a gradual shift toward late-cycle monetary easing. 

Against this backdrop, India strengthened its relative position, supported by resilient domestic demand, public infrastructure spending, and a benign inflation environment. CPI inflation fell well below target, giving the RBI room to cut policy rates by a cumulative 125 bps in 2025, alongside liquidity support through OMOs, CRR cuts, and FX operations.

Credit conditions improved in H2 2025, with bank credit growth firming to ~12% YoY and aggregate lending by upper- and middle-layer NBFCs rising over 21%, led by infrastructure and wholesale segments. While asset quality remained strong, selective risks persisted in unsecured retail lending. In this environment, direct lending in India and structured credit strategies within private markets played a complementary role in meeting refinancing and capex requirements, reinforcing the risk return profile of private debt allocations.

Private credit deal flow in India for H2 2025

In H2 2025, based on the deals tracked by us the India’s private credit market saw a total of US$3.4 billion investments in private credit transactions (compared with US$9.0 billion in H1 2025 and US$3.3 billion in H2 2024). Larger deals over US$100 million accounted for 36% of deal value in H2 2025 vis-à-vis 50% in H2 2024.

From a sector-wise trend in private credit perspective, real estate remained dominant, accounting for 42% of total deal value, followed by healthcare and industrial products at 15% each.

H2 2025 activity reflected a strong emphasis on refinancing, acquisition financing, and capex funding. Similar to H2 2024, domestic private credit managers outpaced global funds, accounting for approximately 64% of total deal value and 69% of deal volume, highlighting the growing depth and competitiveness of the domestic private credit ecosystem.

Private Credit Pulse survey results for H2 2025

The December 2025 private credit survey captured insights from senior leaders across 30 Indian and global high-yield and performing credit funds. Around 45% of respondents focused on performing credit opportunities with IRRs of 12%–18%, while 55% favoured higher-yield strategies in the 18%–24% range, reflecting continued interest in yield focused lending and special situations lending.

Competition within the Indian private credit market has intensified driven by increased capital availability and greater participation from mutual funds, NBFCs, and foreign banks. Real Estate remains the most active sector despite higher perceived risk, followed by energy and renewables and manufacturing.

Fund managers remain optimistic, with 84% expecting competition to rise and a majority forecasting annual investments of US$10–15 billion, underpinned by low-to-moderate portfolio risk and growing demand for structured credit.

Vishal Bansal, Partner at EY India, has also contributed to this article.

Summary

H2 2025 saw a resilient global environment and a steady Indian economy, supported by domestic demand, benign inflation, and sound policies.

Private credit in India continued to expand, with US$3.4 billion deployed in H2 2025. Real estate led deal activity, followed by healthcare and industrials, with refinancing and capex funding as key themes. Domestic managers dominated deal flow, while competition intensified.

Strong bank and NBFC balance sheets, easing liquidity, and selective bank lending continued to support private credit as a complementary financing channel.