The relative calm, industry executives said, is due to the country’s regulatory framework, funding structure and investor base — all of which differ sharply from developed markets.
“The size of the US private credit market is $2 trillion compared to ours of about $25 billion,” Ishwar Kara, deputy managing director at Kotak Alternative Asset Manager, told ET on the sidelines of the IVCA summit in Mumbai. “So the consequences of any issue there, even a small cold, and they will think about leaving.”
Many international institutions have significant exposure to the US market.
Global investors are closely watching developments in the U.S. private credit industry — a market estimated at about $2 trillion — amid concerns about valuations and liquidity in some investment vehicles. In comparison, India’s private credit industry is much smaller and structurally heterogeneous at $20-25 billion.
Even so, the industry believes that India’s private credit ecosystem is relatively safe due to regulatory safeguards and a predominantly domestic investor base.
“Sebi and the regulators are very smart in how they have thought about the whole landscape here,” he said. “A lot of personal credit in India happens through closed-end funds, which ensures that there is no significant asset-liability differential because we invest in illiquid assets that are long-term assets.” Concerns of states
In contrast, many concerns arise in the United States related to semi-liquid investment vehicles that allow periodic redemptions, which can create liquidity pressures during periods of market stress.
“A few of the recent headlines from the US have been related to BDCs or semi-liquid investment vehicles,” said Kaushal Ganirival, managing partner at Ascertis Credit, at the IVCA event. “I think the conditions in India are very different,” he said.
“The way Indian regulations are structured, private credit investment vehicles are closed, removing the risk of non-liability of assets from a semi-liquid vehicle,” Ganirewal said. said Ganirwal. “Banks in India are very restricted from investing in AIFs which means that any potential risk from private credit if at all does not result in broader systemic risk.”
Another factor that distorts the market is the type of investors who participate in private credit funds.
Unlike some international markets where retail investors have access, Indian funds typically attract investment from institutional or sophisticated investors.
“The private credit space in India is largely invested by institutional or sophisticated capital,” said Ganirewal, adding that this creates a safe environment from a regulatory perspective. The industry expects the asset class to grow as the Indian economy expands and companies look for alternatives to traditional bank financing.
Private credit is expected to see a 20% CAGR for the next 20 years to reach $1 trillion, said Kriti Mohan Ghosh, Special Situations Fund-EAAA Alternatives. “Looking 20 years down the line, we’re looking at a $15 trillion economy,” he said.
