Industry Odisha Bureau, Oct 25: Three emerging sectors have drawn ₹16.24 lakh crore in announced commitments. Yet fast-changing technology and slow payments deter lenders. Union Bank of India urges specialised credit structures.
India’s emerging industries are drawing large investment pledges. Bank lending to them, however, remains limited. That is the central finding of a Union Bank of India report. The Economic Times reported its conclusions.
The report identifies 12 emerging sectors likely to drive India’s next capital expenditure phase. AI leads with about ₹5.9 lakh crore in disclosed public and private investment. Semiconductors follow at ₹5.27 lakh crore, and defence at ₹5.07 lakh crore. Biotechnology and green hydrogen are also attracting significant capital.
Together, the top three sectors account for roughly ₹16.24 lakh crore. These are announced figures, not money already spent.
Large pledges do not automatically create demand for bank loans. Financing patterns differ sharply across sectors, the report notes. Debt dominates manufacturing and power projects, which generate steadier cash flows. AI and space ventures lean mainly on equity.
Early-stage technology firms often lack predictable revenue to service loans. Banks, by contrast, must protect depositors and maintain asset quality. Limited lending thus reflects prudence rather than reluctance.
The report ranks technology obsolescence as the top risk. Semiconductor chip nodes shift every three to five years. Graphics processing units, or GPUs, refresh every 18 to 24 months. Such cycles can erode equipment values faster than loans are repaid. That weakens collateral and complicates depreciation and refinancing assumptions. Refresh cycles, however, vary across equipment and business models.
Long payback periods add further strain. Semiconductor projects may take five to eight years to recover investment. Space ventures may need seven to ten years. These recovery periods often exceed typical loan tenors, the contractual repayment terms.
Revenue risks also vary by sector. Green hydrogen has few bankable long-term buyers, leaving offtake uncertain. Renewable projects face payment delays from electricity distribution companies. Defence suppliers contend with long Ministry of Defence payment cycles.
Private firms and global hyperscalers have pledged over $400 billion for AI and data centres. Data centres need land, power, cooling and costly equipment. That makes them closer to infrastructure than to AI software businesses.
Semiconductors carry a separate target of ₹4 lakh crore in private investment. That target covers 2026 to 2032. It should not be added to announced sector figures, as coverage may overlap.
To bridge the gap, the report urges specialised desks for key sectors. These would cover semiconductors, hydrogen, data centres and battery storage. It also recommends milestone-linked disbursements, releasing funds as projects progress. Receivables securitisation and order-book financing could tie credit to contracted revenue. TReDS, the Trade Receivables Discounting System, can ease working capital for smaller suppliers. Equipment leasing and green loans complete the toolkit.
Such structures can manage risk, but they cannot eliminate it. Over three to five years, the report expects demand to shift. Battery storage and semiconductor ATMP should gain prominence. ATMP stands for assembly, testing, marking and packaging. Offtake-linked hydrogen, edge data centres and defence MSMEs may follow.
India’s next investment cycle will need patient, risk-sensitive finance. Sector expertise and sound lending standards must advance together.
