New Delhi, July 2 -- India's private credit market will likely grow at a quick pace in coming years after doubling in size over the last five years but faces risks that have caused turmoil in the US and Europe, a new report says.

Demand for private credit in India is rising thanks to positive legal and regulatory developments as well as constraints that hampered lending by banks and non-banking finance companies. The private debt market recorded $11 billion in total transaction value in 2025 while the assets under management have doubled to $25 billion over the last five years, the report by Moody's Ratings said. The AUM is projected to touch nearly $50 billion by 2030, it added.

Moody's said that borrowing by real estate and infrastructure companies, and promoter financing across various sectors will drive India's private credit market. Currently, real estate accounts for the largest share of the total value of private credit, at 40%.

Big-ticket private credit deals in India in the recent past include the infrastructure and construction conglomerate Shapoorji Pallonji Group, GMR Group and Adani Group. In March, for instance, Apollo provided $500 million to a unit of Adani Energy Solutions Ltd. Apollo also participated in $750-million financing for Adani-owned Mumbai International Airport Ltd last year.

While India remains small by global standards-the US private credit industry manages over $1 trillion while Europe's market size is nearly $500 billion-growth in the South Asian nation is likely to accelerate, the ratings firm said.

Watch out for risks

However, as the industry expands, private credit investors in India will face risks akin to more developed markets, Moody's said.

In recent months, many US and European private credit funds have faced redemption pressure as investor withdrawal requests surged amid concerns over valuation practices, limited transparency, and heavy exposure to legacy software companies.

In May, asset managers Blackstone and BlackRock cut the value of their private credit funds, citing markdowns on troubled loans to companies in software and other sectors. Blackstone and Swiss investment firm Partners Group also capped withdrawals from their private credit funds in June.

Ares Management and Apollo Global Management also faced similar redemption pressure in their flagship non-traded private credit funds, prompting them to cap quarterly investor withdrawals.

"Private credit-related bankruptcies across the globe have shown how opaque financing arrangements can amplify losses and complicate restructuring outcomes," Moody's said

"Similar events could occur in India as deal structures become more sophisticated and leverage increases, particularly if disclosure standards do not evolve in tandem with market growth," it added.

The ratings firm noted that, according to the Securities and Exchange Board of India's norms, private credit funds structured as Category-II alternative investment funds are not permitted to employ fund-level leverage. This limits the buildup of structural leverage within a fund vehicle.

However, the minimization of fund-level leverage does not fully mitigate risks at the portfolio level as leverage can still be embedded at the borrower level via aggressive capital structures, layered financing, and inter-creditor arrangements, Moody's said.

The ratings firm flagged potential underwriting risks as competition among private credit funds intensifies, specifically for promoter-backed and refinancing transactions. Additionally, funds may also face liquidity risks, opacity, and valuation challenges, it said.

"Private credit-related bankruptcies across the globe have shown how opaque financing arrangements can amplify losses and complicate restructuring outcomes. Similar events could occur in India as deal structures become more sophisticated and leverage increases, particularly if disclosure standards do not evolve in tandem with market growth," Moody's said.

Published by HT Digital Content Services with permission from VC Circle.