Speaking to ET Now, Kapoor said that while private credit has expanded rapidly in Western markets, the recent redemption restrictions at a handful of funds do not represent a systemic threat.
Global Private Credit Stress Seen as Isolated
Kapoor pointed out that the private credit market in the West has grown into a massive asset class, now exceeding $2 trillion. In markets of such scale, it is natural that some assets may face challenges.
“What we are seeing is in west it is a fairly mature private credit market. And if you look at the size of the market, it is anywhere $2 trillion plus and any asset class, any market which has sort of grown that size may have some assets which are not doing well and things like that. But I do not think so it is a systemic risk. I also do not think that entire asset class that we are probably thinking that in the west especially around US citing these two funds which have sort of restricted these redemptions in any way pose a contagion impact or for that matter any ripple impacts to developing markets and that too in context of India.”
According to him, the developments appear to be “very case specific” rather than reflective of a structural problem in the asset class.
India’s Private Credit Market Still in Early Stages
Kapoor emphasized that India’s private credit ecosystem is fundamentally different from that of developed markets, both in scale and structure.
While the U.S. private credit market is valued at more than $2 trillion, India’s market is still relatively small, estimated at roughly $25–30 billion. This early stage of development, he said, actually provides certain safeguards.“No, before we sort of come to that, we sort of understand how private markets or how private credit markets in India is really structured and there are a lot of differences between the way private credit actually gets done in western world markets compared to where India is. So, first point is that India is fairly early, fairly infancy to that impact.”
He also noted that transactions in India typically involve tighter safeguards compared to global markets.
“If you look at any typical private credit transaction in India, one is that they are all tightly covenanted. There are strong monitorings. They are all asset backed collaterals and for that matter they are all secured lendings. I mean, you do not have a concept in India that you really start lending to orphan SPVs or you lend to the business development companies and things like that.”
Structural Safeguards Offer Stability
Another important difference, Kapoor said, lies in the structure of deals and fund operations.
Private credit investments in India generally have shorter durations—typically between two and four years, rarely extending beyond five. Moreover, the sector operates with minimal leverage, relying primarily on investor capital rather than borrowed funds.
“Third is leverage. I mean, basically in India you raise the LP capital, you raise the GP capital and that is pretty much what you invest. You do not have another layer of leverage that you have that sort of… obviously with levered capital you amplify returns but in any downside there is a fair bit of structural resilience that it provides, so there is no leverage.”
In addition, most private credit funds in India are closed-ended, which reduces the risk of sudden redemption pressures that can affect open-ended structures.
Kapoor believes these structural characteristics make India an attractive destination for investors seeking exposure to private credit.
“In fact, if you ask me, I think India with all these core characteristics present a far more compelling investing destination in private credit compared to in some of these markets at this point of time.”
Interest Rate Movements Have Limited Impact
On the question of interest rates, Kapoor said private credit pricing does not move in tandem with benchmark policy rates.
“There is a lesser correlation to private credit interest rates compared to where the normal repos in the economy are I think because most of the private credit situations are more probably a need driven, demand driven, and specific situation.”
He explained that even fluctuations of 10–30 basis points in yields typically have little impact on private credit transactions. However, volatility in public markets can lead to greater deal activity in private markets as companies explore alternative financing options.
“But yes, as I have always maintained whenever there is volatility in public markets, the private markets deal flows, private markets deal velocities obviously become more because there is more traffic that comes to the private credit world.”
No Contagion Risk for India
Despite concerns raised by some global experts about a potential bubble in private credit, Kapoor maintained that the risks remain concentrated in a few pockets.
“Again, I mean, the asset class had probably a very fast growth in terms of the asset generations and even the capital that got really allocated. I mean, two trillion by any standard is a very-very large asset class and as I said, these are very few one off, few of the off situations. I do not see any contagion impact.”
He added that even if some additional redemptions occur in the U.S., they are unlikely to have any meaningful connection with India’s private credit market.
“In fact, if you ask me, there will be capital allocation towards more emerging markets including India out of this because Asia generally provides more structural protections, as I said more family-owned businesses, etc, so compared to where western world is.”
Regulatory Framework Remains Strong
Addressing concerns about regulatory oversight, Kapoor said India’s regulatory environment is already quite robust.
“I would not say that there is less regulatory oversight. In fact, I would say that regulators have done a great job. If you look at the amount of reporting amount of disclosure and the way the credit funds or generally AIFs are being run, they are very-very tightly regimented and the rule book there is probably as stringent as any other in normal day-to-day banking loans and with central bank of the country as well.”
He also expects regulations to evolve further as the industry grows.
“With passage of time as the AIF industry generally including private credit is increasing, we are seeing more sort of circulars, more guidelines that gets sort of come out from sebi or for that matter the earlier ones get further improvised to more tighter.”
For now, Kapoor believes India’s private credit market remains well insulated from global turbulence and may even benefit from a shift in investor capital toward emerging markets.