India's private credit market is now a mainstream asset class growing at 30% CAGR. Sitting at $25 billion, it aims to bridge a $500 billion MSME credit gap, offering customised capital and strategic mentorship as an alternative to banking.
Private Credit's Ascent as a Mainstream Asset Class
The Indian private credit market is rapidly transitioning into a mainstream asset class, serving as a critical alternative to traditional banking channels to support economic growth, top industry leaders told ANI in exclusive interviews on the sidelines of the IVCA Private Credit Summit 2026 on Thursday.
Massive Headroom for Growth in MSME Sector
Monu Jain, Partner at Aavishkar Capital and Co-Chair of the IVCA Private Credit Council, highlighted that private credit is expanding at a robust 30 per cent CAGR. Sitting at approximately 25 billion dollars, Jain noted the market represents just 0.6 per cent of India's GDP, signaling massive headroom to bridge an estimated 500 billion dollar MSME credit gap. "Lending is a full spectrum, and digital footprints are now being used as a regular source of data validation for MSMEs," Jain told ANI, emphasizing how GST data helps evaluate new-to-credit businesses safely.
Geopolitical Tailwinds and New Opportunities
Addressing geopolitical concerns, she added that despite global turmoil, India remains a beneficiary of supply chain realignments like the "China plus one" strategy, opening up a fresh 40,000 crore to 60,000 crore rupee opportunity driven by AI, data centres, and renewable energy.
A 'Win-Win' Alternative to Equity Dilution
Rajat Tandon, President of IVCA, dismissed any negative perceptions surrounding alternative debt instruments, noting that private credit offers customized capital alongside strategic mentorship. "It is a clear win-win situation where a company needs to grow but does not want to dilute its equity," Tandon stated.
Complementary Role with Traditional Banking
He emphasized that under the Reserve Bank of India's new co-lending framework, traditional banks and alternative debt funds will complement each other rather than clash. "They will co-exist, and I think that's exactly what is good for the financial ecosystem as a whole," he added, projecting the market to safely scale past 30 billion dollars by 2030 on the back of India's booming digital economy.
A High-Yield Alternative for Affluent Savers
Karthik Athreya, Managing Director at Sundaram Alternates, tracking an eight-year-plus book, observed that total commitments under Alternative Investment Funds (AIFs) have crossed a substantial 12 lakh crore rupees. Athreya clarified the core operational difference from public debt, explaining that private credit deals with unlisted and unrated private instruments, relying entirely on the manager's underwriting competence. He noted that the asset class is increasingly functioning as a high-yield alternative to fixed deposits for affluent savers.
"Private credit is emerging increasingly as a very viable asset class... meant to create risk-adjusted returns which are significantly higher than public markets," Athreya concluded, pointing out its growing role in HNI asset allocation. (ANI)
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