India's private credit moment: A subtle change in the relative value of the world

India’s private credit market gains global attention as US cycle cools

As private credit markets in the US show late-cycle signs—narrowing spreads, intense competition and an expected shift from interest-rate pauses to rate cuts—India’s private credit ecosystem is moving in the opposite direction, offering global investors a compelling relative-value opportunity.

Industry experts say private credit is no longer viewed as a single global asset class. Instead, allocations are becoming increasingly geography-specific, shaped by diverging economic cycles, regulatory environments and capital supply conditions.

Diverging credit cycles

In the US, private credit expanded rapidly over the past decade, benefiting from abundant capital, strong deal flow and higher-for-longer interest rates. That environment is now changing, with excess capital compressing yields and prospective rate cuts putting pressure on floating-rate returns.

India, by contrast, is at an earlier and more favourable stage of the cycle. Private credit has become a scaled and institutionalised segment of the domestic financial system, supported by strong corporate borrowing demand and growing participation from domestic asset managers.

Deal volumes in India’s private credit market reached about $9 billion in the first half of 2025, with assets under management exceeding $30 billion. Despite this growth, private credit accounts for only around 0.6% of India’s GDP, compared with 4–5% in developed markets such as the US, indicating significant headroom for expansion.

Scale, discipline and higher yields

Larger-ticket deals—often exceeding $100 million—are becoming more common, reflecting improved structuring, stronger underwriting and increased confidence among institutional lenders. This scale has helped bring greater discipline, clearer exit pathways and stronger corporate relationships.

A key attraction for global investors is the persistent yield differential. Senior secured and unitranche private credit deals in India continue to offer mid- to high-teen returns, even as covenant quality and collateral structures improve. In contrast, US private credit yields are largely in the mid-single to low-double digits and face downward pressure.

This gap is driven by structural factors, including higher nominal growth, a relative scarcity of long-term private capital and greater execution complexity, which together support a capital scarcity premium in India.

Risk increasingly ‘priceable’

While risks such as currency exposure, governance variability and enforcement timelines remain, market participants say India’s maturing private credit ecosystem is making these risks more transparent and priceable. Senior secured structures, active portfolio management and strong local execution are increasingly seen as critical to capital preservation.

Rising global interest

With Indian private credit funds building longer track records, global institutional investors are showing growing interest in India-focused vehicles across alternative asset classes. As global spreads compress, India is emerging as a rare combination of elevated yields, improving institutional depth and diversification benefits.

The article is contributed by Aakash Desai, CIO & Head – Private Credit, 360 ONE Asset.