Union Bank of India report forecasts financing shift to emerging sectors

A research report from Union Bank of India indicates that financing demand in the country’s emerging sectors is expected to shift toward battery storage, semiconductor packaging, green hydrogen projects, and defense suppliers over the next three to five years.

Artificial intelligence (AI), semiconductors, and defense are projected to lead the investment pipeline. Indicative public and private investments are estimated at approximately Rs 5.9 lakh crore for AI, Rs 5.27 lakh crore for semiconductors, and Rs 5.07 lakh crore for defense. Specific opportunities are expected in advanced semiconductor assembly, battery recycling, lithium iron phosphate (LFP) and sodium-ion battery capacity, and storage infrastructure.

The report identifies several risks for lenders, including technology obsolescence, uncertain revenues, and long investment payback periods. Semiconductor projects typically require five to eight years for payback, while space projects may take seven to ten years, often exceeding conventional loan tenures. Additionally, AI infrastructure faces rapid technology cycles, with GPU clusters requiring upgrades every 18 to 24 months.