Private-Credit Funds Through GIFT City

Private-credit funds domiciled in GIFT City offer NRI investors foreign-currency-denominated exposure to Indian private-credit strategies, avoiding the INR conversion an equivalent mainland fund would require, while the underlying loans are typically still made to Indian borrowers.

Because the fund vehicle is foreign-currency denominated but the underlying loan book is Indian, there is an inherent currency mismatch worth understanding: loan interest is typically earned or hedged relative to INR movements, and the fund's reported foreign-currency NAV reflects that underlying dynamic.

The common failure is assuming a foreign-currency-denominated fund eliminates currency risk entirely. The underlying assets remain INR-linked, so the fund's foreign-currency returns still carry indirect exposure to INR movements unless the manager explicitly hedges that exposure.

Before committing, confirm whether the fund actively hedges INR/foreign-currency exposure on its underlying loan book or passes that currency risk through to investors unhedged, and understand which approach better fits the investor's own currency risk tolerance.

A foreign-currency-denominated vehicle doesn't eliminate currency risk if the underlying assets remain INR-linked — confirm the fund's specific hedging approach.