Indian regulators’ preference for straightforward financial products is a challenge for the private credit market and its bespoke deals, according to a partner at one of the country’s top law firms.

“Our regulators prefer plain vanilla products,” Leena Chacko, partner at Cyril Amarchand Mangaldas in Mumbai, told Bloomberg Television on Monday. “That can be a challenge for structuring a transaction, because there are limitations as to what can be done.”

Private credit — which often involves customized deals with floating rates of interest — mushroomed into a $1.6 trillion global market, as investors hunted for returns in a world of ultra-low yields. In India, regulatory constraints on bank lending have allowed credit funds to gain a foothold.

Setting up a special purpose vehicle can be difficult, and there are also restrictions on the equity components of a deal, Chacko said.

“There are issues in relation to the enforcement process— there’s a lot of backlog in the courts,” she told Rishaad Salamat. “As a result of which recovery can be quite challenging.”

--With assistance from Anto Antony.