Private credit deployments experienced a dramatic 61% decline to $3.5 billion in January-June 2026, compared to $9 billion in the same period last year, according to a report by consultancy firm EY. The sharp drop occurred amid a volatile macroeconomic environment and shifting fund dynamics. Despite the overall decline, deal activity remained broadly similar to the $3.4 billion witnessed in the second half of 2025, as reported by The Economic Times. The overall activity was significantly influenced by a single $3.1 billion fundraise in the year-ago period, which had artificially inflated comparative figures.
Nearly 79% of transaction volume was conducted by domestic private credit funds during the first half of 2026, with the global funds' share by quantum of money deployed steadily declining. Foreign funds' share dropped to 26% from 36% in H2 2025 and 68% in H1 2025, as reported by EY. The report notes that it has only captured deals of over $10 million each and depended on publicly available data and disclosures of certain deals in surveys. "The growing share of domestic capital is one of the most significant developments in India's private credit market," said Vishal Bansal, partner, debt and special situations, EY India, according to The Economic Times.
Despite perceived riskiness in the sector, real estate continued to be the favorite investment destination for private credit funds during the first half of 2026. The sector accounted for 35% of all deployments, followed by healthcare at 13% and food and beverages at 12%. Kalpataru led the chart as the biggest deal with $176 million raised, according to the EY report. The food and beverage share rose sharply from 1% in the second half of 2025, indicating growing investor interest in this sector. Stress-related situations, capital expenditure requirements, and acquisitions continued to drive demand in these sectors. The investments reached $3.5 billion across more than 100 transactions above $10 million, as reported by The Economic Times.
From a fundraising perspective, several significant deals emerged during the first half of 2026. Kotak Alternate Assets Management raised $691 million under the Kotak Real Estate Fund, $496 million for the Kotak Yield and Growth Fund, and $42 million for the Kotak Life Sciences Fund. Additionally, Avendus' structured credit fund raised $290 million, while Motilal Oswal Alts' India Credit Excellence Fund secured $183 million, as reported by The Economic Times.
The growth in private credit comes as demand for corporate financing continues to accelerate significantly. Bank credit to large industries rose from 4.6% in calendar 2025 to more than 14% in the first five months of 2026, while bank financing to MSMEs has increased at a double-digit pace for four consecutive years, according to The Economic Times. Private credit is expected to benefit from the ongoing capital expenditure cycle, with refinancing, holding-company funding and acquisition financing serving as key drivers of activity during the first half of 2026. Looking ahead, infrastructure, renewables and energy sectors could become larger themes as capital requirements rise, with global funds likely to retain dominance in large-ticket deals while domestic funds increasingly participate through co-investments.
