Mumbai: Non-banking finance companies (NBFC) providing wholesale funding are critical to the Indian lending ecosystem, especially when banks cannot meet credit demands due to capital constraints, said Anshu Jain, former co-chief executive officer of Deutsche Bank AG.

“To me, I think a wholesale-funding NBFC approach is a very important part of the ecosystem," said Jain, speaking at an event organized by Mumbai-based think tank Gateway House, on Tuesday. He added that credit penetration in India is low compared with other emerging market economies.

“I don’t see bank balance sheets being able to grow as rapidly as they need to," he said, while making the case for NBFCs.

The focus on digitization and the government’s thrust on financial inclusion, along with high-speed 4G telecom coverage, will make it easier for NBFCs to thrive, he said.

On 10 May, Mint reported that Jain is setting up an NBFC in India along with former colleague Bhupinder Singh. Singh was Deutsche Bank’s co-head of corporate banking and securities for Asia Pacific and left the bank in 2015. When asked about his plans, Jain declined to comment.

With public sector lenders becoming risk averse as they battle an unprecedented bad loan problem, NBFCs have been stepping in to lend, enabled by more flexible operations compared with banks. NBFCs have also become active in segments like online lending to small and medium enterprises and structured lending. The Reserve Bank of India has also floated a discussion paper on peer-to-peer lending and proposes to allow these lenders to register as NBFCs.

Jain is currently an adviser to fintech company Social Finance Inc., which is a marketplace lender that provides student loan refinancing, mortgages and other types of loans through an online platform.

When asked about his view on the possibility of Britain’s exit from the European Union (EU), Jain said the move would hurt the economy. “I’m of the opinion that Britain leaving the EU would be real negative for the UK economy, would not be great for Europe and a destabilizing event for the world. India is part of that globalised world," he said.

Britain will vote on 23 June on whether to stay in the bloc or exit.