Private credit has emerged as a significant investment opportunity, attracting investors with returns of up to 22% according to reports from Mint. The investment class has experienced double-digit growth over the last five years, with industry estimates placing assets under management at $25-30 billion as of March 2025. Most wealth managers now offer private credit in some form, reflecting its growing acceptance among institutional investors. According to EY India, 166 private credit transactions worth $12.4 billion were completed in calendar 2025, representing a 35% increase from 2024. Real estate funding accounts for approximately 42% of India's private credit deals, while healthcare and industrials each represent about 15% of the market.
Real estate funding accounts for approximately 42% of India's private credit deals, while healthcare has emerged as the second-largest sector at 15% in calendar 2025, according to EY India. Food and beverages represent about 12% of the market, with the healthcare sector's rise attributed to relatively stable cash flows, defensive characteristics, and growth potential. Private credit refers to loans given by non-bank lenders and operates under a disclosure-driven framework rather than RBI's prescriptive lending rules. The market is moving deeper into the mid-market, with transactions of $10-60 million accounting for 61% of deal value, up from 51% in H2 2025.
The competitive landscape has shifted significantly with domestic funds now accounting for 74% of deal value and 79% of deal volume in H1 2026, up sharply from 32% in H1 2025, as reported by EY India. Global funds account for the remaining 26%, down from 68% in H1 2025. From July 1, 2026, banks have been allowed to participate in acquisition financing, potentially putting pressure on private credit funds in simpler transactions where banks can offer cheaper funding. However, funds are expected to retain advantages in complex, bespoke, and time-sensitive transactions. Major fund launches include Vivriti Asset Management's $537 million private credit fund and Modulus Alternatives' $215 million performing credit fund.
The higher yields on private credit come with increased credit, liquidity, manager, and valuation risks that investors must understand before committing. Unlike traditional debt, private credit is inherently riskier and cannot substitute for low-risk debt allocation. As reported by Mint, the risk to investors is that private credit is not closely regulated, with funds typically having lock-in periods of five to seven years and a minimum mandate of three years. The return structure also includes tax implications, with 18% interest income effectively becoming 12.6% for someone in the 30% tax bracket before surcharge and cess. Despite these risks, 60% of respondents were bullish and 13% very bullish about the market over the next one to two years, according to EY's H1 2026 survey. However, investors should note that an advertised 18% return does not necessarily mean the investor will receive an 18% net return due to management fees, expenses, and taxes.
Before investing in private credit, investors should consider factors including the fund's underwriting philosophy, track record, borrower profiles, and collateral safety. According to Mint, investors should examine the fund's underwriting approach, historical performance, borrower profile, strength of loan covenants, collateral quality, and the fund's lock-in period. The CIO of a large family office noted they are pitched a minimum of 10-15 credit AIFs annually and typically invest in only one or two, capping total allocation at 5-6% of the portfolio. The investment may suit those with resources to thoroughly understand the product and its risks, confidence in the fund house and manager, and the ability to absorb potential capital losses without affecting cash flow or main financial goals. Funds are also beginning to integrate AI for data analysis, portfolio monitoring, and underwriting, with some integrating it more deeply into deal origination and credit assessment.
