Private credit in India is structured debt provided directly to businesses by non-bank lenders — AIFs, private credit funds, NBFCs, and family offices — outside the conventional banking system. India's private credit market reached USD 3.5 billion in H1 2026 alone, with domestic funds now accounting for 74% of all deal value, according to the EY Private Credit Report H1 2026. For business owners and CFOs seeking structured debt of ₹30 crore and above, private credit is no longer an alternative to bank debt — in many sectors and situations, it is the primary route to capital.
This guide covers everything a business owner needs to understand about private credit in India — what it is, how it works, who provides it, when to use it, and how to access it efficiently.
What is private credit and how is it different from a bank loan?
Private credit is debt capital provided through privately negotiated transactions rather than public markets or conventional bank lending. Unlike a bank loan, which follows standardised eligibility criteria, product structures, and regulatory requirements, private credit is structured specifically for the borrower's situation — with tenure, repayment profile, security package, and coupon rate designed around the specific business and transaction.
The key structural differences:
Tenure. Bank term loans in India typically run 3-7 years. Private credit facilities regularly run 5-10 years, which is critical for long-gestation projects like real estate developments or hospital expansions.
Repayment flexibility. Banks require regular principal repayment from operating cash flows. Private credit can accommodate bullet repayment at maturity, moratorium periods during construction or ramp-up phases, and stepped repayment schedules that align with the business's actual cash flow generation.
Security requirements. Banks follow standardised security policies with limited flexibility. Private credit lenders assess each security package on its merits and structure the charge accordingly — they can lend against receivables, business cash flows, or future project revenues in ways that banks' credit policies prohibit.
Speed. A well-prepared private credit mandate can close in 45-60 days. Bank credit processes for large tickets typically take 90-180 days and involve multiple committees.
Who provides private credit in India?
Three categories of lender dominate India's private credit market:
Category II AIFs (Alternative Investment Funds): SEBI-regulated private credit funds that pool capital from HNIs, family offices, and institutional investors and deploy it as structured debt. As of H1 2026, domestic AIFs account for 74% of private credit deal value in India — the highest domestic share on record. They offer the most flexible structures and are the most active in real estate, healthcare, and mid-market corporate credit.
Specialised NBFCs: Non-Banking Financial Companies with specific sector expertise — real estate construction finance NBFCs, mid-market corporate lending NBFCs — that lend at ticket sizes and structures that their bank competitors cannot match. NBFCs can move faster than AIFs on simpler transactions and typically have broader geographic reach.
Family offices: Large Indian family office treasury functions that deploy a portion of their corpus as direct credit to businesses in sectors they know from their own operating history. Family office credit is relationship-driven, often faster to close than AIF credit, and can provide significant flexibility on structure when the lender trusts the borrower.
→ Related article: What is a Category II AIF and how does it lend to businesses in India?
Which sectors does private credit serve in India?
Real estate remains the dominant sector at 35% of total private credit deal value in H1 2026, followed by healthcare at 13% and food and beverage at 12% — a dramatic increase from F&B's 1% share in H2 2025, reflecting the sector's emergence as an active private credit borrower class.
The sectors where private credit adds the most value relative to bank debt:
Real estate (35% of market): Construction finance, land acquisition, project refinancing, and acquisition of other developers. Banks face regulatory constraints on construction-stage lending; AIFs and NBFCs do not.
Healthcare (13% of market): Hospital expansion, equipment financing, diagnostic chain acquisition. Healthcare cash flow cycles — longer receivable timelines from insurance companies, equipment with long useful lives — require tenures that banks rarely offer.
MSME and manufacturing: Expansion capital, acquisition financing, and refinancing of expensive legacy debt for mid-sized manufacturers with ₹50-500 crore revenue that have outgrown their bank relationships.
Food and beverage (12% of market, up from 1% in H2 2025): The fastest-growing segment. Regional food manufacturers, branded food companies acquiring distribution networks, and food processing businesses expanding capacity.
→ Related article: What do private credit lenders check before funding a real estate project?
→ Related article: Why healthcare is India's second largest private credit sector
When does a business need private credit rather than a bank loan?
Private credit is the right route when one or more of these conditions apply:
The ticket size exceeds what a single bank relationship will provide. India's mid-market credit gap — businesses too large for microfinance and too complex for standard bank credit — is estimated at $15-20 billion. For requirements above ₹30 crore in sectors where banks are cautious, private credit is often the only practical route.
The structure does not fit a standard bank product. Bullet repayment, long tenure, moratorium periods, or security structures involving future cash flows rather than current assets require the flexibility that only private credit provides.
Speed is a constraint. Acquisition financing with a competing bidder, a construction start date, or a refinancing with a legacy lender's deadline all require a lender who can commit and close in 45-60 days. Banks rarely can.
The business is in a sector where banks are cautious. Construction-stage real estate, certain manufacturing segments, and businesses undergoing ownership transitions are systematically underserved by bank credit. Private credit fills this gap.
→ Related article: NCD vs term loan — which debt instrument is right for your business?
What does private credit cost in India?
Private credit costs more than bank debt. This is a fact, not a deficiency — it reflects the flexibility, speed, and sector tolerance that private credit provides relative to bank lending.
The cost components:
Coupon rate: Senior secured private credit for quality real estate and corporate borrowers in India runs at approximately 12-16% per annum depending on sector, security quality, and borrower profile. Healthcare and MSME credit at higher risk levels can run at 14-18%. NCD placements with family offices can sometimes achieve 11-13% for borrowers with strong profiles and clean security packages.
Arrangement fee: Typically 1-2% of the facility amount, paid to the debt advisor and sometimes shared with the lender. On a ₹50 crore facility, this is ₹50-100 lakh.
Processing and legal fees: Legal documentation, security creation stamp duty, debenture trustee fees, and credit rating fees — typically ₹15-30 lakh depending on transaction complexity and the states where security is created.
Total cost of capital: For a quality borrower, private credit in India typically delivers total cost of capital (including all fees) at 13-17% per annum effective. The comparison against bank debt at 10-12% is narrower than it appears once bank processing fees, collateral monitoring charges, and the hidden cost of bank covenant restrictions on business decisions are factored in.
→ Related article: How NCD private placement works in India — step by step
How to access private credit efficiently — the three requirements
The businesses that close private credit mandates efficiently share three characteristics.
Complete credit package. A credit information memorandum with audited financials, cash flow projections under base and stress scenarios, a defined security package with current valuations, and a specific use of funds tied to a repayment mechanism. Lenders who receive a complete package spend their due diligence time verifying — not collecting information. Lenders who receive an incomplete package spend weeks asking basic questions before due diligence begins.
Clean regulatory and legal position. No pending litigation over proposed security assets, no historical debt defaults, no ROC filing gaps, and no pending regulatory actions. Each of these adds weeks to the due diligence timeline and can result in repricing or withdrawal of an offer.
A specific, credible repayment mechanism. Private credit is not equity. Lenders underwrite repayment, not exit multiples. The clearest path to a competitive credit offer is demonstrating specifically how the facility will be serviced — from what cash flow stream, on what timeline, with what buffer.
→ Related article: What to prepare before approaching private credit lenders — the complete credit package
The outlook for private credit in India — 2026 and beyond
The EY India Private Credit Report H1 2026 found that 60% of respondents were bullish on India's private credit market over the next 1-2 years, with a further 13% very bullish. The primary drivers cited: sustained demand for flexible capital from India's mid-market, the IBC Amendment Act 2026 strengthening creditor protection, and the deepening of the domestic fund ecosystem.
The market is entering a period of maturation — moving from high-yield opportunistic credit toward performance-oriented lending at lower spreads, as competition among domestic funds increases. This is good for quality borrowers: as the market deepens, pricing improves and the range of available structures expands.
For businesses with requirements of ₹30 crore and above, the mid-market private credit window is more accessible in 2026 than at any point in the market's history. The capital is available, the lenders are active, and the advisor ecosystem to connect them is more sophisticated than before.
Eone Capital arranges private credit of ₹30 crore and above for real estate, MSME, and healthcare businesses across India. Active mandate pipeline: ₹940 crore. Two mandates successfully closed.
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