India's private credit market to grow, domestic funds to lead: EY

India's private credit market is poised for growth, with an EY report highlighting a major shift towards domestic funds. These funds accounted for 74% of the US$3.5 billion deal value in H1 2026, dominating sectors like real estate.

India’s private credit market is likely to remain on a growth trajectory over the next one to two years, even as competition among lenders intensifies, with domestic funds increasingly expected to drive deployment and target larger transactions, according to a research report by EY. The shift is already visible in the first half of 2026.

Domestic Funds Strengthen Market Position

Private credit deals tracked by EY totalled US$3.5 billion in H1 2026, marginally higher than US$3.4 billion in the second half of 2025. Domestic private credit players accounted for 74 per cent of total deal value and around 79 per cent of deal count, significantly strengthening their position against global funds.

EY said domestic funds are benefiting from their local presence and access to mid-market borrowers and are increasingly participating in larger transactions as well. Global funds’ share of private credit deal value fell to 26 per cent in H1 2026 from 36 per cent in H2 2025 and 68 per cent in H1 2025.

Broad-Based Demand Drives Market

The market’s underlying demand remains broad-based. Refinancing, real estate project funding, HoldCo funding and acquisition financing were among the key purposes for which private credit was deployed during the period. EY’s private credit pulse survey also found that stress-related situations, capital expenditure and M&A financing were emerging as important sources of demand.

Positive Investor Sentiment

Investor sentiment remains constructive. EY’s survey showed 60 per cent of respondents were bullish on private credit over the next one to two years, while another 13 per cent were very bullish and 27 per cent were cautious.

Sectoral Focus and Key Trends

Sectorally, real estate remained the largest recipient, accounting for around 35 per cent of deal value, followed by healthcare at 13 per cent and food and beverages at 12 per cent. Food and beverages gained particular momentum during the period.

Future Outlook

With domestic funds gaining scale, a deeper deal pipeline and demand for flexible financing solutions, EY expects private credit to remain an important component of India’s evolving credit ecosystem, although lenders will need to navigate rising competition and selective risk-taking. (ANI)

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