1 week ago
India's Private Credit Market Grows as Insolvency Rules Reshape Lending
Private credit means investors lend money directly to companies instead of using only banks.
An EY report says this type of lending in India may grow.
Banks and non-bank financial companies do not fund every specialised need, leaving gaps for private lenders.
India’s market was worth about $25–30 billion in March 2025.
New insolvency rules change how lenders may recover money if a borrower fails.
Only the part of a loan covered by collateral may receive secured treatment.
This means lenders may care more about accurate collateral values and stronger contracts.
They may also want more influence over decisions when a company’s debts are reorganised.
India’s private credit market was estimated at $25–30 billion in March 2025, compared with about $1.4 trillion in the United States.
EY expects the market to grow as banks and non-bank financial companies leave funding gaps in specialised segments.
The IBC Amendment Act, 2026, effective May 26, changes recovery rights for dissenting secured creditors.
Claims exceeding the realisable value of collateral will rank as unsecured in liquidation proceedings.
Lenders are expected to emphasize stronger documentation, collateral valuation, voting influence and inter-creditor protections.
- Who
- Private credit funds, banks, non-bank financial companies, investors and secured creditors, as discussed in an EY report.
- What
- India’s private credit market is expected to expand while insolvency reforms change lenders’ recovery strategies and protections.
- Where
- India, with comparisons to the United States.
- When
- The market estimate refers to March 2025; the IBC Amendment Act, 2026, took effect on May 26, 2026, and the report was published August 23, 2026.
- Why
- Funding gaps left by banks and non-bank financial companies are supporting market growth, while insolvency amendments are changing recovery economics.
Growth Opportunity
Risk and Selectivity
Market outlook
Growth Opportunity
Private credit can expand because banks and non-bank financial companies continue to leave funding gaps in specialised segments.
Risk and Selectivity
Investors are expected to become more selective about collateral quality, contractual protections and insolvency influence.
Lender protection
Growth Opportunity
Private lenders can provide refinancing, promoter financing, special-situation funding and real-estate and infrastructure finance.
Risk and Selectivity
The insolvency amendments may reduce the value of relying mainly on security, requiring stronger documentation, structural protections and voting power.
Investment structure
Growth Opportunity
India’s closed-ended funds, limited leverage and fixed tenures have shielded the market from redemption pressures seen in the United States.
Risk and Selectivity
The market remains relatively small, and lenders may prefer bilateral loans, club deals and concentrated groups to exert influence over resolution outcomes.
Key facts
- India private credit market
- Estimated at $25–30 billion as of March 2025.
- United States private credit market
- Approximately $1.4 trillion, according to the report.
- Fund structure in India
- Predominantly closed-ended Category II alternative investment funds with limited leverage and fixed tenures.
- IBC amendment effective date
- May 26, 2026.
- Collateral treatment
- The secured portion of a claim is limited to the realisable value of collateral; any excess ranks as unsecured in liquidation.
- Potential lender responses
- Greater focus on loan-to-value discipline, periodic valuation, additional-security triggers, documentation and inter-creditor agreements.
- Potential litigation area
- Disputes over the methodology and timing used to determine collateral’s realisable value.
Sources
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