Private credit in India costs between 11% and 18% per annum depending on sector, borrower profile, security quality, and instrument type — with the most competitive rates at 11-13% available to strong borrowers with clean security in sectors that domestic funds actively target, and rates at 16-18% applying to higher-risk situations, weaker security, or sectors with limited lender competition. A well-structured private credit facility from a quality domestic AIF for a real estate developer with a clean track record and adequate security currently prices at 13-15% per annum in India's mid-market.
For a CFO evaluating private credit against bank debt at 9-12%, the rate differential is real — but the comparison is incomplete without accounting for the full economics of each option.
The rate components that actually matter
Base coupon rate. This is what gets quoted first and compared most often. Current private credit coupon rates in India by risk profile:
Real estate construction finance — senior secured, Tier 1 developers, top cities: 12-14% Real estate construction finance — mid-tier developers, Tier 2 cities: 14-17% Healthcare expansion — hospital groups with established operations: 12-14% MSME manufacturing expansion — asset-backed, strong cash flows: 13-15% Acquisition financing — combined entity with adequate coverage: 13-16% Refinancing of existing debt — quality borrower, clean track record: 11-13% Stress or special situations: 16-20%+
NCD placements with family offices — for the right borrower profile — can achieve 11-12.5%, reflecting the family office's lower return requirement and the absence of fund management fees in the cost structure.
Arrangement fee. The debt advisor's fee, typically 1-2% of facility size, is usually paid at disbursement. On a ₹50 crore facility at 1.5%, this is ₹75 lakh. This is a one-time cost, not an annualised cost, but must be factored into the effective cost of capital.
Processing fees. The lender's own processing fee — 0.5-1.5% of facility size — covers their credit assessment and documentation costs. Combined with arrangement fee, total upfront fees typically run 2-3.5% of facility size.
Legal and structural costs. Debenture trustee fees (₹5-10 lakh per annum for the trust period), legal documentation costs (₹5-15 lakh depending on complexity), and stamp duty on security creation (0.1-6% of the charged value depending on state and instrument). Stamp duty is the largest variable cost and varies most by state — Maharashtra and Karnataka have higher rates than many other states.
Credit rating fees. Every privately placed NCD requires a SEBI-registered credit rating — CRISIL, ICRA, CARE, or India Ratings. Annual fees for mid-market rating mandates run ₹5-15 lakh plus annual surveillance fees.
The true comparison: private credit vs bank debt
The comparison between private credit at 14% and bank debt at 10% understates the value of private credit and overstates the cost advantage of bank debt.
Bank debt hidden costs: Collateral monitoring fees (0.25-0.5% per annum of facility), processing fees (1-2% at origination), legal documentation costs, and mandatory insurance premiums. More significantly: the cost of the covenant restrictions that bank debt imposes — restrictions on additional borrowing, dividend payment, capex above defined thresholds, and key management changes. Each restriction has a real economic cost that does not appear in the interest rate.
Private credit value: The 200-400 basis point premium over bank debt buys: tenure aligned to the actual project lifecycle, repayment flexibility matched to real cash flows, security structures that free existing assets for other uses, and decision speed that allows the business to execute time-sensitive opportunities.
For a real estate developer who cannot get construction finance from their bank, the comparison is not 14% vs 10%. It is 14% vs the cost of not being able to build — which is the cost of the entire project return foregone.
How to improve the rate available to you
Rate improvement comes from four factors under the borrower's control:
Security quality. A first charge over clear-title land in a liquid market reduces the lender's recovery risk and compresses the spread. Improving the security package — completing title due diligence, resolving existing encumbrances, offering additional collateral — can reduce the coupon by 100-200 basis points.
Financial track record. Lenders price based on observed behaviour, not stated intentions. Three years of clean debt servicing history, consistent financial performance, and no ROC filing gaps reduce the perceived risk and improve the rate.
Promoter net worth. A personal guarantee from a promoter with a verifiable, substantial net worth — documented through income tax returns, property valuations, and investment statements — reduces the lender's expected loss given default and is reflected in pricing.
Choosing the right lender. Not every fund prices every sector the same way. A real estate-focused AIF that has done 30 construction finance transactions will price a developer's construction facility more competitively than a generalist fund doing its fifth. The right lender match — through a well-connected advisor — consistently delivers better pricing than approaching every fund in the market.
Eone Capital places private credit mandates with the lenders most competitive for your specific sector, ticket size, and security profile.
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