INDIA Law and Practice Contributed by: Divyanshu Pandey, Utsav Johri, Sucheta Bhattacharya and Nishal Makharia, JSA Advocates & Solicitors
1. Private Credit Overview 1.1 Private Credit Market
Reserve Bank of India (RBI) is the central bank of India and regulates Indian banks. Under the Indian banking regulations, Indian banks can only lend for productive purposes. Private credit funds are a flexible source of capi - tal that can be used for a variety of purposes that Indian banks may not be able to service or where funding from Indian banks is due to regulatory restrictions on end use and exposure norms. Therefore, there has not been a significant over - lap between the Indian public debt market and the private credit market. As private credit is at a nascent stage in India, there has not yet been a significant number of private credit transactions refinanced by bor - rowings raised from banks and the public bond market. However, it is anticipated that the next couple of years will witness an upturn in such refinancing where the banks are permitted to refinance within the regulatory framework of RBI. 1.3 Acquisition Finance As mentioned in 1.2 Interaction With Public Matters , RBI regulations permit an Indian bank to finance the acquisition of equity shares in lim - ited circumstances. Generally, a promoter’s con - tribution towards equity cannot be funded by a bank, and banks cannot finance the acquisition of equity shares other than in exceptional cases. Therefore, financing for a domestic acquisition has generally been from non-banking financial companies (NBFCs) or through the issuance of non-convertible debentures (NCDs) in the debt market. The investors in such NCDs can be for - eign portfolio investors (FPIs), mutual funds or alternative investment funds (AIFs). Domestic acquisition finance was previously majorly dominated by NBFCs, but the arbitrage enjoyed by NBFCs has reduced drastically and,
The private credit market in India has been on a steady upwards trajectory. According to publicly available data, private credit deals witnessed a 22.4% increase on a deal value basis in the first half of financial year (FY) 2024–25 (compared to the same period in the previous FY). The deal value in the first half of FY 2024–25 aggregated to approximately USD6 billion. In FY 2023–24, private credit deals in India crossed an aggre - gate deal value of USD8.5 billion. The push from the Indian government towards the development of infrastructure and manufac - turing in India has provided a conducive envi - ronment for growth of the private credit market in India. The projected growth trajectory of the Indian economy has also garnered interest in the Indian market among global private credit players. In 2024, the real estate sector led the way, accounting for 28.3% of the total deal volume. Utilities and infrastructure followed with 15.7% and 10.7% respectively. Other emerging sectors included renewable energy, healthcare and phar - maceuticals. However, sectors such as renewa - ble energy, data centres, logistics and healthcare are expected to provide significant opportunities in the coming years. With the overall positive outlook, the requirement of growth capital and the availability of surplus dry powder, the Indian private credit market is set to grow exponentially in the next few years. 1.2 Interaction With Public Markets The Indian debt market is dominated by Indian banks, with the major players being the pub - lic sector banks and other private banks. The
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