Domestic funds take 74% of India's shrinking private credit market

Indian domestic funds handled 74 percent of private credit deal value in the first half of 2026, according to EY data reported by Alternative Credit Investor. Global funds' share fell to 26 percent from 68 percent a year earlier. The deal count points the same way: domestic vehicles did roughly 79 percent of transactions.

The overall market, however, is smaller. EY counted 102 private credit deals above $10 million in the period. Their combined value was $3.5 billion, down from $9 billion a year earlier. The implied average deal is about $34 million, a mid-market profile that EY says matches demand concentration.

Real estate credit was the largest sector, at 35 percent of total deal value, followed by healthcare and food and beverage, EY said.

Vishal Bansal, EY India partner for debt and special situations, said domestic funds are “increasingly identifying opportunities across refinancing, acquisition financing and special situations, particularly in the mid-market segment where demand for structured capital remains robust.” Real estate's lead fits that description; it is a collateral-heavy corner of the lending market.

Dinkar Venkatasubramanian, EY India's national leader for debt and special situations, called the period a phase change. “What began as a niche source of alternative capital has become an important pillar of the country's financing ecosystem,” he said.

The share flip is real, but the dollar totals do not show domestic funds deploying more than they did a year earlier. A year ago the market was worth $9 billion, with global funds at 68 percent, implying domestic vehicles took about $2.9 billion. This year, 74 percent of a $3.5 billion market is roughly $2.6 billion. That is slightly less. The deal count, at 79 percent domestic, is the more favorable evidence for local funds; the dollar figures, on their own, are not.

On the same arithmetic, global funds' implied dollar volume fell from about $6.1 billion to close to $900 million. That accounts for most of the market's $5.5 billion decline. Whether the cause was a strategic pullback, a shortage of suitable deals, or a shift in how deals are structured, the EY data alone does not say. What it does say is that the contraction was concentrated among foreign funds.

The second half will test whether domestic funds can hold their share as the total market stabilizes. The H1 figures describe a domestic-led market; whether it is also a growing one is a question for the next two quarters.