Indian Investors Are Next.
Every few years, an asset class that was exclusively available to large institutions quietly opens to a broader pool of capital. The process is rarely clean. Infrastructure debt, real estate credit, and leveraged loans all followed the same arc: first, institutional adoption; then, regulatory codification; then, retail access — sometimes in the right order, sometimes not. Private credit in India is somewhere in the middle of that arc right now, and the direction of travel is clear enough that investors should understand what they are entering before the marketing machine arrives in full force.
As we established in our analysis of private credit's global restructuring of finance, the asset class is on track to absorb a meaningful share of the $41 trillion global corporate lending market. The secondary market alone — where investors trade existing private credit positions — hit $226 billion in volume in 2025. That is not a niche market. It is a structural shift in how corporate debt is originated, held, and priced globally. India's version of this shift is earlier-stage but accelerating.
How Indian Investors Currently Access Private Credit
The primary vehicle for Indian sophisticated investors today is the Alternative Investment Fund (AIF) structure — specifically Category II AIFs, which SEBI permits to invest in private credit and direct lending strategies. These funds require a minimum commitment of ₹1 crore from investors who meet the accredited investor threshold, and they are closed-ended, meaning capital is locked for the fund's tenor — typically five to seven years.
The domestic AIF market for credit strategies has grown substantially. SEBI data indicates that Category II AIF fundraising crossed ₹3.5 lakh crore in cumulative commitments as of early 2025, with a growing proportion allocated to credit rather than private equity. Several established Indian asset managers — Edelweiss Alternatives, Kotak Alternate Asset Managers, Avendus — now run dedicated private credit funds targeting mid-market Indian corporates with senior secured loans at spreads that would be unreachable through public bond markets.
The typical Indian private credit fund targets net returns of 12–15% on INR-denominated senior secured loans to mid-market companies with revenues between ₹100 crore and ₹2,000 crore. This segment sits below the threshold that public capital markets efficiently serve and above where microfinance operates — a gap that traditional bank credit increasingly avoids due to capital adequacy constraints identical to those that created the global private credit opportunity post-2008.
The Retail Access Question — and Why SEBI Is Moving Carefully
The democratisation of private credit in India faces a structural tension that SEBI has not yet fully resolved. The asset class's most attractive characteristic — illiquidity premium — is also its greatest risk for investors who do not fully understand what they are buying. A retail investor who places savings into a private credit fund expecting bond-like behaviour will be surprised when they cannot exit at par during a credit stress event. The mark-to-model valuation problem — where losses look smoother on paper than they are in reality — is more acute for Indian retail investors than for institutional ones, because the institutions have risk management infrastructure that can see through the accounting.
SEBI's consultation papers through 2024 have explored frameworks for retail access to alternative assets, including private credit, through listed vehicles analogous to Business Development Companies (BDCs) in the US or listed investment trusts in the UK. A listed structure solves the liquidity problem partially — investors can exit in the secondary market — but introduces a different problem: listed private credit vehicles trade at discounts to net asset value during risk-off periods, meaning the exit price may be worse than the underlying portfolio quality suggests.
The Yield Arithmetic — and What It Actually Requires
The 10–14% net return that global private credit has historically delivered is not free money. It compensates for four specific things: illiquidity, complexity, credit research costs, and manager dependence. An investor in a public bond fund can exit at any time, holds a diversified portfolio, and relies on transparent market pricing. An investor in a private credit fund is locked in, dependent on the manager's underwriting quality, and cannot verify valuations independently on a daily basis.
For Indian investors accustomed to the liquidity of mutual funds and the relative transparency of listed debt markets, these are genuine adjustments. The question is not whether private credit belongs in an Indian investor's portfolio — for the right portion of the portfolio, it clearly does. The question is sizing and timing: entering a credit strategy near the peak of a benign credit cycle with maximum leverage in the underlying funds is different from entering at a more cautious point in the cycle.
What the Next Phase Looks Like
Three developments will shape private credit access for Indian investors over the next two to three years. SEBI's finalisation of a listed vehicle framework for alternative credit — if it arrives — will be the single largest structural change, opening the asset class to a much broader investor base with better liquidity protections. The entry of global private credit managers through the GIFT City route is already underway, with firms like Ares and Apollo establishing Indian presence; their arrival brings more capital but also more competition for deals, compressing spreads. And the stress test — the first genuine credit cycle downturn that tests how Indian private credit funds manage defaults and recoveries — has not happened yet. When it does, it will distinguish the competent managers from the rest far more clearly than any marketing document.
Private credit belongs in serious Indian investors' consideration set. It does not belong in every portfolio, and it does not belong without a clear-eyed understanding of the illiquidity, the manager dependence, and the valuation opacity. The yield is real. The risk-adjusted yield — net of these factors, over a full credit cycle — is still being established in the Indian context.
