🧠 Food for thought

Implications, context, and why it matters.

A pullback by Indian banks opened room for private credit funds

• Firms such as 360 ONE grew after Indian banks stepped back from corporate lending during the “twin balance sheet crisis,” when banks and companies were both weighed down by stressed debt 1.
• Indian banks held 73% of commercial credit in 2011. That share fell to 64% in 2022 as lending shifted toward consumers 1.
• Mid-sized firms often found bank financing harder to secure. Private credit funds moved in with another source of capital 2.
• India’s private credit assets under management, the total money these funds oversee, rose from less than US$0.7 billion in 2010 to US$17.8 billion in 2023 3.
• Activity kept climbing in 2025. Funds deployed US$9.0 billion in the first half, already above the full-year deal value for 2024 3.

Rules will shape the next phase of India’s private credit market

• Private credit is changing India’s financial system. Banks are leaning toward retail loans, large companies tap bond markets, while private funds back mid-sized businesses 1.
• The market relies on the Insolvency and Bankruptcy Code (IBC), India’s main framework for resolving corporate distress. It cut debt resolution times from 4.3 years on average to about one to two years 3.
• Unlike banks or Non-Banking Financial Companies (NBFCs), private credit funds such as Alternative Investment Fund (AIF) lenders lack some legal powers to enforce security 1. They also cannot use the Reserve Bank of India’s (RBI) out-of-court restructuring process, which leaves them more reliant on the IBC to protect loan and debt investments 1.
• Regulators are tightening rules. Banks or NBFCs cannot swap direct loan exposure for indirect exposure through AIF units, a step meant to curb ever-greening of loans, the practice of extending troubled debt to avoid booking losses 1.