Now Reading: Private credit yields up to 22% but carries higher risk, investors warned
-
01
Private credit yields up to 22% but carries higher risk, investors warned
Private credit yields up to 22% but carries higher risk, investors warned
Private credit, loans from non-bank lenders, has grown rapidly to $25-30 billion in assets under management, with most wealth managers now offering the product. EY India data shows 166 private credit transactions…
Private credit, loans from non-bank lenders, has grown rapidly to $25-30 billion in assets under management, with most wealth managers now offering the product. EY India data shows 166 private credit transactions worth $12.4 billion in calendar 2025, up 35% over 2024. Real estate accounts for 42% of deals, with healthcare and industrials each at 15%.
Returns of up to 22% are attracting investors, but risks are higher than conventional debt. Private credit sits under a disclosure-driven framework rather than the RBI's prescriptive lending rules, meaning less regulation. Advertised returns are net of fees and taxes: an 18% return becomes 12.6% for someone in the 30% tax bracket before surcharge and cess.
Funds typically have a five-to-seven-year lock-in with a three-year minimum. Loans can be secured against unlisted shares or promoter equity. One large family office caps private credit allocation at 5-6% of its portfolio and invests in only one or two out of 10-15 funds pitched each year.
Indian Opinion Analysis
The Reserve Bank of India tightened bank and NBFC lending norms after the 2008 crisis and again after covid, creating the funding gap that private credit fills. Unlike a bank loan, a private credit fund's net asset value does not trade daily, so true stress on a loan may only become visible at maturity. For an investor, the key risk is that this is not a substitute for the low-risk debt portion of a portfolio. The CIO of PPFAS Wealth, which published this analysis, suggests capping exposure at 5-6% and accepting that capital loss is possible. The next check for any investor is the fund's track record across past credit cycles, not just its stated yield.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
