New Delhi, India, October 24 (ANI) — Financing demand in India’s emerging sectors is expected to shift toward battery storage, semiconductor packaging, green hydrogen projects with assured buyers and defense suppliers over the next three to five years, as investments in new growth industries create opportunities for banks, according to a Union Bank of India research report.
The report noted that artificial intelligence (AI), semiconductors and defense are likely to lead the investment pipeline, with indicative public and private investments of approximately ₹5.9 lakh crore, ₹5.27 lakh crore and ₹5.07 lakh crore, respectively.
It said financing opportunities would increasingly emerge in advanced semiconductor packaging and assembly, battery recycling, lithium iron phosphate (LFP) and sodium-ion battery manufacturing capacity, energy storage infrastructure and suppliers of components to the defense industry.
The report also highlighted the potential for financing hydrogen projects backed by assured offtake agreements. Meanwhile, demand for data centers is expected to expand toward edge computing and colocation facilities as AI inference grows.
However, the report cautioned that technological obsolescence, uncertain revenues, delayed payments and long investment payback periods remain significant risks for lenders.
Semiconductor projects typically have payback periods of five to eight years, while space projects may take seven to 10 years, exceeding conventional loan tenures, the report said. AI infrastructure also faces rapid technological cycles, with graphics processing unit clusters requiring upgrades every 18 to 24 months.
The report said 10 of the 12 emerging sectors already had identifiable debt-financing channels, while AI and space remained predominantly equity-funded because of technological risks and long payback periods.
It recommended that banks develop specialized lending capabilities for semiconductors, hydrogen, data centers and battery storage, alongside financial products such as milestone-linked disbursements, receivables financing, equipment leasing and green loans.
The report identified renewable energy, semiconductors, green hydrogen and critical minerals as sectors suited to project finance and funding led by development finance institutions. Electric vehicles and drones, meanwhile, could benefit from asset financing and lending by nonbanking financial companies.
India’s renewable energy capacity stood at 288.6 gigawatts (GW), against a target of 500 GW by 2030. Meanwhile, the electric vehicle and battery storage market was projected to grow from $34 billion to $113 billion by 2030.
The report said financing opportunities would increasingly shift toward commercially viable projects and supply-chain participants as these emerging sectors expand. (ANI)
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