Credit market doubles to $25 bn in 5 years: Moody’s

India’s private credit market has doubled in size in the past five years to about $25 billion in Assets Under Management (AUM) as of 2025 end, and will further expand amid strong financing demand, Moody’s Ratings said on Thursday.

However, the new RBI norms, which allow banks to finance acquisitions, will increase competition in a segment historically dominated by alternative capital.

“While the new rules may benefit borrowers by lowering costs for financing and increasing its availability, they could compress yields and reduce deal flows for private credit providers for acquisition financing,” Moody’s said.

As per the new RBI rules effective July 1, the RBI, for the first time, has allowed banks to fund strategic acquisitions of equity shares and compulsorily convertible debentures, subject to certain conditions. Moody’s said India’s private credit market has expanded rapidly over the past five years, evolving from a source of financing primarily for distressed companies to a provider of credit for a wider mix of financially stable businesses. 

“India’s private credit market has grown rapidly in the past five years - to more than $11 billion in annual transaction value in 2025 and about $25 billion in AUM as of the end of that year - it remains small by global standards”, Moody’s said.