Restrictive Regulations Impede Growth Of India's Private Credit Market, Says Legal Expert

In the ever-evolving world of Indian finance, private credit markets face a unique hurdle: the regulators’ fondness for simple, “plain vanilla” financial products and according to Leena Chacko, a partner at Cyril Amarchand Mangaldas in Mumbai, this preference complicates the structuring of more intricate, tailor-made financial transactions.

What Happened? Sharing this insight with Bloomberg Television, Chacko also pointed out the snags in the enforcement process. The court system’s backlog can make recovering investments a tough row to hoe. In a nutshell, while India’s private credit market has potential, it navigates a tricky landscape shaped by regulatory preferences and legal complexities.

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Private credit in India: Private credit, a market thriving on customized deals with variable interest rates, has grown to a staggering $1.6 trillion globally. In India, this sector has found its footing thanks to the tight leash on bank lending by regulations.

However, these same regulations make it challenging to set up special purpose vehicles, a kind of temporary company created for specific financial operations, and to work around limits on equity – the ownership stake in a deal.

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