India’s private credit landscape is experiencing a rapid transformation, with domestic funds now accounting for the majority of deal value and an increasing focus on mid-sized transactions, signalling a strategic shift in financing dynamics.
India’s private credit market is increasingly being shaped by domestic capital, with local funds accounting for 74% of deal value and nearly 79% of deal count in the first half of 2026, according to an EY report. The shift suggests that Indian managers are taking a larger role in financing companies that are refinancing debt, funding acquisitions or seeking growth capital outside the traditional banking system. EY said investments totalled $3.5 billion across more than 100 transactions above $10 million in the period, underscoring how quickly the market has deepened.
The composition of those deals points to a clear move towards the mid-market. Transactions in the $10 million to $60 million range made up 61% of total deal value in the first half, up from 51% in the previous half, while deals above $120 million fell to 18% from 27%, EY said. That trend is important because mid-sized borrowers often need structured finance that sits between bank lending and large institutional funding, a niche where domestic funds may have an advantage in speed and flexibility. Moneycontrol reported that competition is compressing yields in larger sponsor-backed deals, reinforcing the appeal of the mid-market.
Sector preference is also widening. Real estate remained the largest destination for private credit, taking 35% of deal value, but healthcare and food and beverage also featured prominently, according to EY. Food and beverage’s share rose sharply to 12% from 1% in the second half of 2025, while healthcare accounted for 13%. EY said that pattern shows lenders are increasingly willing to look beyond property-backed loans towards consumer-facing and operating businesses that need refinancing, working capital or acquisition finance. A separate EY report on the second half of 2025 said real estate also led deployment then, with healthcare and industrial products following.
Investor sentiment appears to support further growth. EY said nearly 73% of private credit investors expect activity to remain strong over the next one to two years, with demand expected to be driven by stressed situations, capital expenditure and mergers and acquisitions. The report also found that 67% of respondents were targeting returns above 18%, while 33% were looking at internal rates of return between 12% and 18%, suggesting competition will remain focused on higher-yielding opportunities. A more selective approach to sectors and geographies may follow, particularly given the concentration of risk in real estate and the broader macro uncertainty that still surrounds global capital markets.
For now, the market’s evolution appears to hinge on the balance between domestic and global money. EY said large transactions will continue to attract international funds, but domestic players are becoming better placed to capture the growing pool of mid-sized opportunities. That could make private credit a more established part of India’s financing landscape over the next two to three years, especially as lenders expand into asset-heavy businesses, consumer sectors and other companies that need structured capital beyond conventional bank lending.
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