India Private Credit Market Sees Strong Growth In 2026

India’s private credit market is expected to maintain strong momentum over the next two years despite increasing competition, according to a recent EY survey report. The sector witnessed significant expansion during the first half of 2026, supported by strong domestic fundamentals, improved banking sector performance and rising demand for flexible capital solutions.

The report highlighted that the India private credit market remained resilient despite global economic challenges, geopolitical uncertainties, commodity price fluctuations and trade-related concerns.

Private credit investments in India reached USD 3.5 billion during H1 2026, with domestic funds contributing significantly to overall deal activity. The growing preference for structured capital solutions has further strengthened the private credit ecosystem.

Real Estate Leads India Private Credit Market Activity

According to EY’s survey, real estate continued to dominate the India private credit market, accounting for 35 per cent of total deal value during the first half of 2026.

Healthcare emerged as the second-largest sector, contributing 13 per cent of private credit deal value. The Food and Beverage sector also recorded remarkable growth, becoming the third-largest segment with a 12 per cent share compared with only around 1 per cent in the second half of 2025.

The increasing activity across multiple sectors reflects growing demand for alternative financing options among businesses.

Domestic Funds Strengthen Private Credit Investments

The EY report revealed that domestic private credit players outperformed global funds in India’s market. Domestic investors accounted for nearly 74 per cent of total deal value and approximately 79 per cent of total deal count.

This growing dominance highlights increasing confidence among domestic investors and the expanding role of local funds in providing capital support to businesses.

The India private credit market has benefited from demand for customised financing solutions, especially in sectors requiring growth capital, restructuring support and acquisition financing.

Strong Banking Sector Supports Credit Expansion

The growth of the India private credit market has been supported by improvements in the country’s banking sector. Scheduled Commercial Banks entered FY27 with healthier balance sheets, improved asset quality and stronger capital positions.

The Capital to Risk-weighted Assets Ratio (CRAR) of banks improved to 17.7 per cent in March 2026 from 17.4 per cent a year earlier. The Common Equity Tier 1 (CET1) ratio also increased from 14.8 per cent to 15.3 per cent during the same period.

These improvements have strengthened financial stability and created a favourable environment for continued credit growth.

Asset Quality Improvement Boosts Investor Confidence

Indian banks also witnessed continued improvement in asset quality during FY26. The Gross Non-Performing Asset (GNPA) ratio declined to 1.8 per cent, while the Net NPA ratio dropped to 0.4 per cent.

The provision coverage ratio stood at 75.6 per cent, reflecting stronger risk management practices among banks.

Improved profitability, better capital buffers and declining bad loans have increased confidence among investors participating in the India private credit market.

Investors Remain Optimistic About Future Growth

The EY survey found that around 60 per cent of respondents remain optimistic about the future of India’s private credit sector over the next one to two years.

Despite expectations of increased competition, investors believe the market will continue to expand due to strong economic fundamentals and rising demand for alternative financing.

However, respondents also highlighted potential risks, with real estate being identified as a sector with higher default concerns despite remaining one of the most active areas for private credit deals.