A lending crisis has opened up profitable opportunities to lend to Indian performing companies.

The Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers Pension, may deploy $1.5 billion in Indian private credit.

According to livemint, which quoted informed sources, the pensions are setting up credit platforms and may tie-up with local players for the purpose.

Indian loan growth very sluggish

Growth in loans in India slumped to 6% in the September 19 quarter. That’s nearly half of the 11% growth in the year-ago period, said Credit Suisse. Both banks and non-banking financial companies reported a slowdown in lending.

Moreover, according to Shantanu Sahai, executive director at global investment bank Nomura, the crunch has pushed up borrowing costs for good companies.

“Pension/sovereign wealth funds could lend at attractive yields to well-performing companies that are now starved for credit to fund their growth cycle,” he commented.

Sahai also revealed that new-age companies were able to raise capital or borrow funds. These included companies in healthcare, financial services, technology, or consumer space. However, the old guard sectors, such as manufacturing and industrials and telecom, were facing a liquidity shortfall.

“That is where the value of some of these alternative credit providers starts to become a lot more pronounced compared to the others,” he said. He was referring to entities such as Canadian pension funds CPPIB and Ontario Teachers Plan.

CPPIB and Ontario Teachers Plan: Deployments planned for India

Meanwhile, CPPIB is likely to invest about $1 billion in Indian private debt. Its current investments in India aggregate about $10.6 billion. It has a long-term focus on the emerging markets of China, India and Brazil.

Ontario Teachers will likely invest around $500 million, and it is a late entrant to investing in India.

[Related Story: CPPIB Reports 2.2% Return in the Second Quarter ]