India's private credit market doubles to $25 billion AUM in five years: Report

Private credit is rapidly gaining prominence as an alternative to bank loans in India. The market has doubled to nearly $25 billion in assets under management (AUM) over the past five years and is expected to continue growing, supported by strong demand for financing from businesses, according to a report by Moody’s Rating.

Although India's private credit market has expanded rapidly over the past five years, crossing $11 billion in annual transaction value in 2025 and reaching around $25 billion in assets under management (AUM) by the end of the year, it remains relatively small compared with global markets.

The report further highlighted that the implementation of the Insolvency and Bankruptcy Code (IBC) in 2016 has significantly enhanced India’s insolvency framework which has boosted lender confidence, including private credit funds' ability to provide financing for stressed companies or underwrite complex loans, supporting growth in transactions for special situations, restructuring and refinancing.


Additionally, the regulations for domestic private credit funds under the Category II Alternate Investment Fund (AIF) framework have strengthened market credibility.

According to Moody's, borrowing by real estate and infrastructure companies, along with promoter financing, continues to account for a significant share of India's private credit market. The real estate sector accounts for nearly 40% of the total value of private credit whereas infrastructure and utilities companies make up the largest portion.

The report noted that private credit funds are stepping in where conventional lenders have become more selective, offering tailored financing structures to borrowers with complex capital requirements.

The report also warned of potential liquidity risks. Some private credit structures allow partial early redemptions, which could create liquidity mismatches if investor withdrawals accelerate during periods of market stress.

In such situations, forced asset sales may pressure valuations across portfolios. Moody's cited the 2018 NBFC liquidity crisis as an example of how funding stress can spread quickly if liquidity management fails to keep pace with market growth.

The report highlighted growing interest from global alternative asset managers, many of whom have significantly expanded their presence in India's private credit market.

International investors are increasingly participating in large financing transactions involving infrastructure projects, renewable energy, real estate, acquisitions and corporate refinancing, reflecting confidence in India's long-term growth prospects.

Some of the major private credit transactions in 2025 included refinancing for the Shapoorji Pallonji Group, Mumbai International Airport, Adani Group (Renew Exim), Greenko Energy, Vodafone Idea, Reliance Capital and Manipal Education & Medical Group, among others.

Despite these challenges, Moody's believes that India's private credit market has significant headroom to grow, supported by expanding financing needs and the country's robust macroeconomic momentum.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)