India’s private credit market is rapidly evolving from a niche financing alternative into a more institutional and strategically important source of capital. Driven by strong Alternative Investment Fund (AIF) inflows, larger transactions and increasing demand for customized financing, the asset class is gaining relevance among businesses and sophisticated investors.

AIF Inflows Strengthen Private Credit

A key catalyst behind this growth is the increasing flow of capital through AIFs. Recent fundraising activity highlights growing investor confidence in private credit investment strategies, with capital increasingly available for deployment across structured lending, real assets and mid-market opportunities.

The growing participation of domestic family offices, HNIs and institutional investors is also broadening the capital base for private credit. This development is particularly significant as investors seek alternatives that can potentially provide attractive income while diversifying traditional equity and fixed-income portfolios.

Larger Deals, More Complex Structures

India’s private credit market is also witnessing a meaningful increase in transaction sizes. Typical deals are now in the ₹200 - 500 crore range, with tenors generally extending to 5 - 7 years. Select transactions are considerably larger, reflecting the increasing ability of private lenders to participate in sophisticated financing requirements.

Private credit is expanding beyond conventional corporate lending into M&A financing, promoter funding, refinancing, stressed assets and structured transactions. Instruments such as secured non-convertible debentures and mezzanine financing are being used to create customized solutions around borrower requirements and underlying collateral.

Attractive Yield, Stronger Risk Discipline

The opportunity for investors is supported by the potential for attractive yields. Structured private credit transactions can command mid-teens yields, with select special-situation and distressed opportunities offering higher return potential. Venture debt, another specialized segment, has also emerged as an important part of the market, with yields of approximately 13 - 15%+ alongside potential equity-linked upside.

However, rising deal sizes and increasing complexity make disciplined underwriting more important than ever. Investors need to assess borrower cash flows, collateral quality, covenants, leverage, sector exposure and downside scenarios before committing capital.

India’s Significant Growth Potential

Despite its rapid expansion, Indian private credit remains relatively underpenetrated compared with developed markets. The market reached approximately $25 billion in AUM by the end of 2025, having doubled over five years, while annual transaction value exceeded $11 billion in 2025. Real estate represents approximately 40% of private credit transaction value, followed by sectors such as infrastructure and utilities.

This growth reflects a broader structural shift in India's financing ecosystem. As businesses require increasingly flexible sources of capital, private credit for family offices can bridge financing gaps that may not always be adequately served by traditional lenders.

The Road Ahead

India’s private credit market is entering a more mature phase - defined by larger transactions, sophisticated structures and a broader institutional investor base. The opportunity remains compelling, but long-term success will depend on disciplined capital deployment, robust risk management and careful manager selection.

Sàwai Capital: Investing with Discipline

At Sàwai Capital, we believe private credit opportunities should be evaluated through the lens of capital protection, collateral strength, cash-flow visibility and risk-adjusted returns.

Our approach focuses on identifying structured opportunities where rigorous underwriting and thoughtful transaction design can create resilient investment outcomes.

Connect with Sàwai Capital to explore private credit strategies designed to complement sophisticated portfolios and support long-term wealth creation.

Frequently Asked Questions (FAQ’s)

1. What is driving the growth of private credit in India?

AIF inflows, increasing corporate financing requirements, larger transactions and demand for customized lending structures are key growth drivers.

2. What yields can private credit generate?

Structured private credit transactions can offer mid-teens yields, while certain venture debt and special-situation strategies may offer higher return potential. Returns vary based on risk, structure and borrower quality.

3. How large is India's private credit market?

India's private credit market reached approximately $25 billion in AUM at the end of 2025, having doubled over five years.