India’s National Investment & Infrastructure Fund (NIIF), backed by the Indian government and global investors including the Abu Dhabi Investment Authority (ADIA), is planning to raise up to $2bn for its latest private credit fund, according to a report by Bloomberg.

NIIF CEO Sanjiv Aggarwal outlined the fund’s strategy at a venture capital event in Mumbai, stating that it will focus on performing credit to capitalise on the increasing investor demand for high-yield debt.

The move comes as India’s private credit market gains traction, with over $1bn already raised this year. Prime Minister Narendra Modi’s infrastructure push has driven a surge in middle-market financing needs across sectors such as solar energy and road construction. Additionally, India’s expanding base of high-net-worth individuals is looking to diversify portfolios beyond traditional equities and fixed income.

A recent EY report revealed that private credit investments in India reached $9.2bn across 163 deals last year. However, it also cautioned that intensifying competition in the performing credit space could make deal execution more challenging, potentially leading to more aggressive lending terms.

NIIF currently manages four funds, including its largest, the Master Fund, which is dedicated to infrastructure investments. Other vehicles include a private markets fund, a strategic opportunities fund that takes direct stakes in companies, and an India-Japan private equity fund focused on environmental preservation. The fund’s backers also include global investors such as AustralianSuper and Singapore’s Temasek Holdings.

With private credit emerging as a key financing tool for India’s infrastructure ambitions, NIIF’s latest fund is expected to attract strong interest from institutional investors seeking exposure to the country’s rapidly growing debt market.