India’s central bank had reportedly warned troubled IL&FS Financial Services (IFIN), a subsidiary of Infrastructure Leasing & Financial Services (IL&FS), about its precarious financial situation, but no remedial action was taken. In recent weeks, IL&FS and IFIN have defaulted on repayment of debts.

In its annual inspection report for the year 2014-2015, the Reserve Bank of India (RBI) observed that IFIN’s net owned funds had turned negative and a similar observation was made in the subsequent year. But the parent company, IL&FS, refuted RBI’s observation and failed to take any corrective measures, the Economic Times reported.

The IL&FS rating was downgraded to defaulting status after it failed to repay 10 billion rupees in loans to Small Industries Development Bank of India. The default also created a massive crisis of confidence in the equities market, and caused widespread speculation that most non-banking finance companies are facing liquidity problems.

IL&FS and its subsidiaries on Tuesday filed a petition with the National Company Law Tribunal seeking to restructure its debt. Government-owned entities, which are major stakeholders with an aggregate holding of 40.25% in IL&FS, also have high exposure to its liabilities.

Earlier the country’s largest bank, State Bank of India, had stated that it would continue to fund finance companies and insurer Life Insurance Corporation had also issued reassurances that it would not allow IL&FS to collapse.