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India's private credit market is expected to remain buoyant over the next two years despite rising competition, with real estate continuing to dominate deal activity in H12026, followed by healthcare, according to an EY survey report.
India's private credit market expanded significantly during H12026 despite global macroeconomic challenges, geopolitical tensions, commodity price volatility and trade uncertainties. This growth can be attributed to solid domestic fundamentals, robust banking sector, improving asset quality and broad-based credit growth as per EY. Private credit investments in India stood at USD 3.5 billion in H1 2026 with domestic funds accounting for a significant share in total deal count. Furthermore, continued preference for structured capital and flexible capital solutions was seen in the market. "Domestic private credit players trumped global funds with a share of 74% of the total deal value and accounting for ~79% of the total deal count," the report said, highlighting, real estate sector dominated the overall private credit market accounting for 35 per cent of total deal value, followed by healthcare at 13 per cent. "The Food & Beverage sector witnessed a notable increase in private credit activity during H1 2026, emerging as the third-largest sector by deal value with a share of 12%, compared with around 1% in H2 2025," the report noted. The growth in private credit comes against the backdrop of stronger fundamentals in India's banking sector. Scheduled Commercial Banks entered FY27 with healthier balance sheets, improved asset quality and strong capital buffers, supporting continued credit expansion and resilience against potential shocks. The Capital to Risk-weighted Assets Ratio (CRAR) of banks improved to 17.7 per cent as of March 2026, compared with 17.4 per cent a year earlier. The Common Equity Tier 1 (CET1) ratio also increased to 15.3 per cent from 14.8 per cent during the period. Bank profitability remained robust, with return on assets (RoA) at 1.3 per cent and return on equity (RoE) at 12.6 per cent, although both moderated from the previous year's levels. Also, asset quality continued to improve during FY26, with the gross non-performing asset (GNPA) ratio declining to 1.8 per cent and the net NPA ratio falling to 0.4 per cent. The provision coverage ratio stood at 75.6 per cent, while the annualised slippage ratio moderated to 1.2 per cent. Looking ahead, the EY survey found that 60 per cent of respondents were bullish on India's private credit market over the next one to two years, despite expectations of increased competition. The survey found mixed views on the impact of geopolitical developments, with most respondents reporting limited impact on deployment activity. However, real estate continued to be identified as the sector with the highest perceived risk of default, even as it remained among the most active segments for private credit deals. Stress-related situations, capital expenditure requirements and M&A financing emerged as key drivers of private credit demand, as per EY. (ANI)
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