Domestic private credit funds account for nearly three-fourths of deployments as global funds’ share continues to decline
Mumbai (Economy India): Private credit deployments in India declined sharply by 61 per cent to USD 3.5 billion during January-June 2026, compared with USD 9 billion in the same period a year earlier, amid a volatile macroeconomic environment, according to a report by consultancy firm EY.
Despite the steep year-on-year decline, private credit activity in the first half of 2026 remained slightly higher than the USD 3.4 billion recorded during the second half of 2025.
Large Fundraise Distorted Year-Ago Comparison
According to the EY report, the sharp decline compared with H1 2025 was partly due to a significant transaction during the previous year’s period.
Private credit activity in H1 2025 had been boosted by a single USD 3.1 billion fundraise, which significantly lifted the overall deployment figure.
Excluding the impact of this large transaction, the underlying comparison provides a more balanced picture of private credit activity in India.
Domestic Funds Dominate Deployments
One of the key trends highlighted by the report is the growing dominance of domestic private credit funds.
Nearly three-fourths of total private credit deployments during the first half of 2026 came from domestic funds.
The share of global funds, measured by the quantum of capital deployed, has been steadily declining, indicating a shift in the structure of India’s private credit market.
What Is Private Credit?
Private credit refers to loans and other forms of debt financing provided by private investment funds and non-bank lenders, generally outside traditional bank lending channels.
Private credit funds can provide financing to companies for purposes such as:
- Business expansion
- Acquisitions
- Refinancing
- Working capital
- Infrastructure projects
- Special situations
- Growth capital
The sector has gained importance as companies and investors look for alternative sources of financing beyond conventional bank loans and public debt markets.
Macroeconomic Volatility Weighs on Activity
The decline in private credit deployments comes against a backdrop of continued volatility in the global and domestic macroeconomic environment.
Higher uncertainty can make investors more cautious about deploying capital, particularly into transactions involving higher credit risk.
Private credit investors typically assess factors such as interest rates, corporate earnings, liquidity conditions, refinancing requirements and broader economic growth prospects before committing capital.
H1 Activity Still Ahead of H2 2025
Although deployments fell sharply from the year-ago period, the USD 3.5 billion recorded in H1 2026 was slightly higher than the USD 3.4 billion seen in the second half of 2025.
This suggests that private credit activity has not completely lost momentum despite the challenging environment.
The continued participation of domestic funds could also provide stability to the market as global investors adopt a more selective approach.
Global Funds’ Share Declines
The EY report highlighted a steady decline in the share of global funds in India’s private credit deployment landscape.
Domestic funds now account for a substantial majority of deployed capital, reflecting the increasing depth and maturity of India’s domestic alternative investment ecosystem.
Local funds may also have advantages in understanding Indian businesses, regulatory conditions and sector-specific risks.
Key Numbers
| Indicator | H1 2026 | Comparison |
|---|---|---|
| Private credit deployments | USD 3.5 billion | Down 61% YoY |
| H1 2025 deployments | USD 9 billion | — |
| H2 2025 deployments | USD 3.4 billion | H1 2026 slightly higher |
| Domestic funds’ share | Nearly 75% | Dominant |
| Major H1 2025 fundraise | USD 3.1 billion | Boosted previous-year figure |
Outlook for India’s Private Credit Market
The private credit market is likely to remain an important source of alternative financing for Indian companies, even as investors navigate macroeconomic uncertainty.
The strong contribution from domestic funds could help sustain deal activity, while global funds may continue to adopt a more selective approach.
The H1 2026 data also indicates that while private credit deployments have fallen substantially compared with the unusually strong first half of 2025, activity remains above the second-half 2025 level.
Economy India | www.economyindia.in
