India's Private Credit Market Doubles to $25 Bn in 5 Years: Moody's

India's private credit market has doubled in size in the past five years to about $25 billion in Assets Under Management (AUM) as of 2025 end, and will further expand amid strong financing demand, Moody's Ratings said on Thursday.

However, the new RBI norms which allow banks to finance acquisitions will increase competition in a segment historically dominated by alternative capital.

"While the new rules may benefit borrowers by lowering costs for financing and increasing its availability, they could compress yields and reduce deal flows for private credit providers for acquisition financing," Moody's said.

As per the new RBI rules effective July 1, RBI, for the first time, has allowed banks to fund strategic acquisitions of equity shares and compulsorily convertible debentures, subject to certain conditions.

Moody's said India's private credit market has expanded rapidly over the past five years, evolving from a source of financing primarily for distressed companies to a provider of credit for a wider mix of financially stable businesses.

"India's private credit market has grown rapidly in the past five years – to more than $11 billion in annual transaction value in 2025 and about $25 billion in AUM as of the end of that year – it remains small by global standards", Moody's said.

Its growth will accelerate as funding needs in the country increase amid strong economic conditions, it added.

Although still small by global standards, India's private credit market has significant headroom to grow, supported by expanding financing needs and the country's robust macroeconomic momentum.

The real estate sector accounts for about 40% of the total value of private credit, while infrastructure and utilities companies make up the next largest shares.

Financing led by promoters across various sectors – often for refinancing, liability management or stake acquisitions – is another key part of the private credit market in India, Moody's said.