The private credit landscape in India is experiencing a dynamic transformation, evolving from a niche sector into a mainstream financial solution that caters to a wide array of borrowing needs. Over the past decade, private credit investments have grown significantly, accounting for approximately 9% of all alternative capital investments, amounting to around US $36 billion. In 2024 alone, credit investments accounted for approximately 17% of total investments, highlighting the market’s rapid growth.
Several factors are driving this unprecedented expansion. One of the key demand drivers is the increasing need for flexible financing options among businesses, particularly small and medium-sized enterprises (SMEs). Traditional banking channels often impose stringent requirements and rigid assessment criteria, making private credit an attractive alternative for companies seeking quick and customized financing solutions. Additionally, the rise of new- age industries and the entrepreneurial ecosystem has further fueled the demand for private credit.
Innovative deal structures have played a crucial role in the growth of private credit in India. Structured credit products, mezzanine financing, and hybrid instruments have gained popularity, offering investors a wide range of investment options with varying risk-return profiles. These innovative structures have enabled borrowers to access capital tailored to their specific needs, whether it’s for expansion, working capital, or debt refinancing.
The expanding pool of investors is another significant factor contributing to the growth of private credit. Ultra-high-net-worth individuals (UHNIs), family offices, domestic institutional investors, and global funds have shown increased interest in the sector. The attractive risk-adjusted returns, coupled with the diversification benefits of private credit, have made it a compelling asset class for a diverse group of investors.
Regulatory oversight and policy changes have also played a pivotal role in shaping the private credit landscape in India. The introduction of measures to enhance transparency, protect investor interests, and promote responsible lending practices has instilled confidence in the market. The regulators efforts to regulate and monitor the sector have provided a stable framework for the growth of private credit. However, there is still room for improvement, with ongoing discussions around more enabling regulations and creating a more conducive environment for private credit investments.
As the sector continues to evolve, the panel discussion will delve into various aspects of the private credit landscape. Looking forward to exchanging insights from personal experiences in the credit journey around opportunities and challenges in Private Credit…
Impact fund managers such as Aavishkaar Capital view private credit in India is a huge opportunity to channelise investments into projects and enterprises that generate positive social and environmental outcomes alongside financial returns. By providing much-needed capital to these sectors, we are enabling businesses to expand and innovate, ultimately driving the growth of private credit.
Furthermore, we at Aavishkaar Capital have brought innovative financing structures to the forefront, blending traditional financial instruments with impact-oriented goals. By utilizing blended finance, where concessional capital is combined with commercial capital to de-risk investments and attract more private sector participation, our approach has not only increased the flow of capital into underserved sectors but also enhanced the overall credibility and attractiveness of private credit as an asset class. By demonstrating that investments can achieve both financial returns and positive societal outcomes, we continue to play a crucial role in reshaping the private credit landscape in India.