India Private Credit Deals Drop 61% to $3.5B in H1 2026

Private credit deployments in India experienced a significant 61% decline during the first half of 2026. The total value of deals fell to USD 3.5 billion, a substantial drop from the previous year’s figures.

This contraction, reported by consultancy firm EY, occurred amidst a volatile macroeconomic landscape and evolving fund dynamics. Despite the sharp fall from prior periods, deal activity in H1 2026 was marginally higher than the USD 3.4 billion recorded in the second half of 2025.

Market Contraction and Drivers

The first half of 2026 marked a notable decrease in private credit deployments compared to the same period last year. This highlights a cautious approach in the lending environment.

• H1 2026 deployments: USD 3.5 billion
• H1 2025 deployments: USD 9 billion
• H2 2025 deployments: USD 3.4 billion

Domestic private credit funds spearheaded these deployments, contributing nearly three-fourths of the total capital. Conversely, the involvement of foreign funds has steadily decreased.

Shifting Fund Dynamics

The share of foreign funds in deployed capital has been on a downward trend, reflecting a change in market participation. This shift underscores a growing reliance on local capital sources for private credit.

• Foreign fund share in H1 2026: 26%
• Foreign fund share in H2 2025: 36%
• Foreign fund share in H1 2025: 68%

Real estate continued to be a preferred investment sector for private credit funds, despite its inherent risks. The largest individual deal was a USD 176 million investment by Kalpataru.

Preferred Sectors and Demand Factors

Investment distribution across sectors reveals where private credit is finding demand. The focus on specific industries indicates areas of both opportunity and need for alternative financing.

• Real estate: 35% of deployments
• Healthcare: 13% of deployments
• Food and beverages: 12% of deployments

Demand for private credit was primarily driven by several key factors. These included situations requiring financial restructuring, needs for capital expenditure, and funding for corporate acquisitions.

Understanding Private Credit’s Role

Private credit offers flexible lending solutions to borrowers often underserved by traditional financial institutions like banks. Its customized deal structuring typically provides higher returns for lenders.

The first half of 2026 also saw several external and regulatory shifts influencing private credit volumes. These included a surge in overall bank credit growth and new permissions from the Reserve Bank of India (RBI) for banks to engage in acquisition finance, alongside limited-period incentives for external commercial borrowings.

Notable Fundraising Activities

Despite the deployment slowdown, significant fundraising efforts continued within the private credit space. These activities indicate ongoing investor interest in the asset class.

• Kotak Alternate Assets Management: USD 691 million for Kotak Real Estate Fund, USD 496 million for Kotak Yield and Growth Fund, USD 42 million for Kotak Life Sciences Fund.
• Avendus: USD 290 million for its structured credit fund.
• Motilal Oswal Alts: USD 183 million for its India Credit Excellence Fund.

The EY report, which gathered data from publicly available sources and surveys, focused exclusively on deals exceeding USD 10 million.