Leverage and liquidity are the two ‘Ls’ that a smart CFO must guard. Both not only help scale up businesses but also lead to their downfall, said HDFC chairman Deepak Parekh. The CFO’s job is to raise a red flag at the right time, he also said at the FE CFO Awards function in Mumbai.
Speaking about the need for banks to increase lending, veteran banker said that it’s imperative that the risk-averse lenders get back to lending to infuse adequate liquidity in the economy as sectors including real estate are in desperate need of the same.
So as to prevent extended legal battles, the non-performing institutions must be allowed to wind up their businesses and IBC law needs to be made more robust, he noted.
Adding he said that it’s the duty of the CFO’s to speak up when the need arises to save the businesses. “Don’t be a silent CFO, assuming things will sort out themselves; neither be a CFO who says I have sounded a warning which nobody followed. You have to show spine; you have to speak up ….”.
Watch video: How smart CFOs can scale up and save businesses: Deepak Parekh spells 2-L formula
He also said that businesses need to be extra vigilant during boom and bust times. Most bad decisions are taken during good times and vice versa, he noted, adding it becomes important for a smart CFO to take right decision during such times.
The introduction of the Insolvency and Bankruptcy Code (IBC) has prompted the promoters of the firms to settle cases after lenders have filed for insolvency proceedings at the NCLT, Deepak Parekh also said.