India's private credit turning mainstream, experts project massive headroom for alternative debt in India
Mumbai, July 9
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 toldin exclusive interviews on the sidelines of the IVCA Private Credit Summit 2026 on Thursday.
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.
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.
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. 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.
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
Reader Comments
Interesting read. I'm a bit cautious about unlisted and unrated instruments though. The article mentions they rely entirely on the manager's underwriting competence—what happens if that fails? We saw what happened with some NBFCs in the past. Hope the RBI keeps a close watch on this space while allowing it to grow.
This is exactly what our startup ecosystem needs! Traditional banks often don't understand new-age businesses like AI and renewable energy. Private credit with mentorship sounds like a game-changer. But I hope the returns are genuinely risk-adjusted, not just fancy marketing. High yield usually means high risk, right? 🤔
Great to see IVCA putting this on the map! The co-lending framework between banks and alternative funds is a smart move—banks have the deposits and reach, while private credit has the flexibility. If done right, this could really bridge the credit gap for millions of MSMEs. 30% CAGR sounds aggressive but achievable given India's digital boom.
As someone who works in fintech, I can vouch for the digital footprint angle. GST data is a goldmine for credit assessment—it captures real business activity. But we need better awareness among small business owners about how to use these platforms. Also, concern about the 12 lakh crore in AIFs—are we sure all that money is being deployed wisely?
This is encouraging for retail investors too! Private credit as a high-yield alternative to FDs? Yes please! Fixed deposits are giving peanuts these days. But
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