Liquidity issues should be the major focus of the government now in its efforts to boost economic growth, otherwise, all other efforts will fail, according to Niranjan Hiranandani, Co-Founder and Managing Director, Hiranandani Group.

Post-IL&FS fiasco, the system has broken down. For the first time in India, banks have got ₹1.76 lakh crore excess liquidity. It never happened in the past. This is good as that is the money they will lend. But the bad side is they are not lending, he said, on the sidelines of a meeting here.

Hiranandani, who is also Senior Vice-President of Assocham, said it is not right to have excess liquidity lying with banks and financial institutions and money not getting into the market. Government is asking private players to invest, but if banks don’t give credit, how will it happen, he questioned.

With investigating agencies going after officers, bankers don’t want to make decisions. “My prime answer to all the current issues is, if we don’t improve liquidity issues in the market, all efforts taken for the purpose of reviving the economy will fail,” he felt.

It’s fine to investigate if there is money trail to a bank official. Otherwise, we must protect the officers who have taken the decisions where there is no money trail or proof of corruption, he said.

Hiranandani said that they had pointed out to the government and Reserve Bank of India about the urgency to solve the liquidity issues. “They are working on it and hope it will get solved,” he added.

He lauded government’s efforts in solving a long-pending issue relating to cost of funds.

Globally, the cost of funds is coming down. This was not happening in India. However, RBI has started bringing the rates down and it has reduced it by 120 basis points. But only one-sixth of it was passed on. Now, RBI has now done the right thing, asking banks to link the loans with the external rate. This will lead to an automatic reduction of rates for home loans, etc.

He also noted that a bigger push towards infrastructure, housing, textiles, tourism and MSMEs would not only address the issue of unemployment in the country, but also help achieve higher economic growth.

“When an economic slowdown like this happened in the past decades, most of the economies such as the US, Japan and China gave big impetus to infrastructure to drive economic growth and job creation.

“In the US, Europe or China, roads were built not just for automobiles, but for higher economic growth and job generation,” he said.

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