Summary of this article
NPS Trust is working on a framework to let pension fund managers invest in private credit.
Chairman Dinesh Khara said the process for inviting and screening applications may begin by September.
The move could open new investment avenues for pension funds as India’s private credit market grows.
Dinesh Kumar Khara, the Chairperson of the National Pension System (NPS) Trust, announced a crucial change in the investment landscape for pension funds while speaking at the IVCA Private Credit Summit 2026 in Mumbai on Thursday. He said that NPS Trust is currently developing a comprehensive framework to facilitate investments in private credit by pension funds. The idea is to open new avenues for institutional capital to tap the higher yield potential in the alternative markets.
Private credit is a form of debt where a non-bank lender, such as asset managers, provides loans directly to the borrowers, typically small and medium-sized enterprises that cannot get it from banks. It can serve as a diversifier in a portfolio that is less correlated with the equity markets. The former SBI chairman indicated that to integrate private credit into the pension fund ecosystem, the initial process for inviting and screening applications may start by September.
Khara shared that India’s private credit industry is on a growth trajectory. It is currently valued between $25 billion and $30 billion, per PTI report. The sector has the potential to grow further to be a $100 billion industry by 2050.
While it currently contributes only about 0.6 per cent of the national GDP, the private credit segment has seen strong momentum with growth in the domestic capital pool and mature industry participants. He said that the rapid growth of family offices and ultra-high-net-worth individuals (UHNIs) has been the primary reason to support this momentum, as they are increasingly looking at alternative asset classes.
While this segment is growing fast, Khara emphasised that the financial sector thrives on trust, and because private credit is a relatively new sector in India, it must continue earning confidence through responsible conduct. He underscored that to maintain the growth of the segment, it is necessary to maintain the confidence of both investors and regulators.
He emphasised that authorities are adopting a calibrated approach toward regulation, with the door open for significant reforms as the market matures. Reportedly, the regulators are engaged in discussion regarding the sector’s evolution, and if they are convinced of the industry's stability, the possibility of structural reforms remains high.
While market volatility remains a concern, Khara said that India is in a comfortable position regarding private credit-related risks. He said that the domestic situation is nowhere comparable to the complexities and risks seen in the US. Regulators continue to monitor the development in the sector closely to ensure that the segment does not compromise financial stability.
Simultaneously, major institutional players are already strategising to tap the potential from this shift. Recently, SBI Mutual Fund shared its intention to expand beyond the traditional mutual fund business by entering into private equity, alternative investment funds (AIFs), and other private market offerings. This expansion coincides with the awaited SBI Fund Management initial public offering (IPO). The IPO, which is available entirely as an offer for sale (OFS), is scheduled to be opened for subscription between July 14 and July 16 at a price band of Rs 545-574 per share.
