Private credit funds may get secured creditor status for loan recovery

The government is considering granting regulated private credit funds secured creditor status under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act). A high-level panel, chaired by Niti Aayog member Rajiv Gauba, is currently evaluating the proposal to provide these funds with enhanced loan-recovery powers. This initiative aims to align private credit funds with the enforcement capabilities currently held by banks and non-banking financial companies (NBFCs), potentially lowering borrowing costs and expanding funding access for businesses.