SBI Mutual Fund is restarting its private credit and unlisted equity business through Alternative Investment Funds after receiving regulatory clarity. This move allows India’s largest asset manager to tap into the high-yield mid-market lending space, following similar steps by peers like HDFC Asset Management.
SBI Mutual Fund is set to resume its operations in the private credit market and expand into unlisted equity investments. The fund house, which manages assets worth over ₹13 lakh crore, will channel these investments through Alternative Investment Funds, or AIFs. This initiative follows a period where the fund house had paused its private credit activities to address regulatory concerns raised by the Reserve Bank of India regarding potential overlaps with the operations of its parent organization, the State Bank of India.
Regulatory Clarity and Strategic Shift
The resumption of these activities comes after the Reserve Bank of India reviewed and accepted clarifications provided by the fund house. Private credit involves lending directly to companies, often those that may find it difficult to secure traditional bank loans. By structuring these offerings as Category-II AIFs, SBI Mutual Fund intends to provide growth capital to mid-market companies. The fund house is reportedly preparing to launch these new offerings within the next one to two months. Beyond private credit and unlisted equity, the company is also exploring potential opportunities in the real estate sector, though no final decision on that segment has been announced.
Market Dynamics and Investor Profile
The private credit space in India has grown significantly, with the total market size estimated to have reached $25 billion by the end of 2025. This segment has doubled in value over the last five years, driven by companies seeking alternative financing options to support expansion and innovation. These investment products generally target high-net-worth individuals, as they require a minimum capital commitment of ₹1 crore. Such investments typically carry higher risk compared to traditional mutual fund schemes, reflecting the nature of lending to unlisted or mid-market entities where liquidity may be more limited.
Competitive Landscape and Growth
This move aligns SBI Mutual Fund with broader industry trends where major asset managers are diversifying beyond public market equities and debt. Competitors, including HDFC Asset Management Company, have already established a footprint in this specialized lending space. For SBI Mutual Fund, this expansion creates an additional revenue stream by capturing fees from managing these complex investment structures. While private credit can offer attractive returns for investors, often reported in the 14-16% range, the performance of these funds will depend heavily on the ability of the fund house to manage credit risks and select high-quality borrowers in the mid-market segment. Investors should monitor the fund house’s specific product launches and the eventual scale of these portfolios as they begin to report performance data.