Former CEA Arvind Subramanian on Friday criticised the RBI for its regulatory failures, saying its Financial Stability Reports never mentioned about the possible liquidity crisis in the IL&FS, one of the largest NBFC in the country.
Subramanian further said that India's biggest challenge at the moment is twin balance sheet problem.
"While RBI is one of the best institution, we have. We had some massive failures like Infrastructure Leasing & Financial Services (IL&FS).
"If I am not wrong, if you go back, and see Financial Stability Reports of last 4-5 years, I don't think IL&FS was specifically mentioned as a possible problem, something to be watched out for," he said at an event here.
Recently, Subramanian was in news for claiming that India has been overestimating its GDP by 2.5 per cent between 2011-12 and 2016-17.
Subramanian, a visiting lecturer in Public Policy at the Harvard University, was the CEA in finance ministry from October 2014 to June 2018.
The cash-strapped IL&FS group is sitting on a debt of about Rs 94,000 crore.
Several group companies have defaulted on the payment of interests on loans.
The problems at the diversified IL&FS group, that has been going in for many years, came to light when it defaulted on debt repayments last year.
The IL&FS crisis had contagious effect on the NBFC (Non-banking financial company) sector as liquidity started drying up for them.
Finance Minister Nirmala Sitharaman in the Budget proposed steps to help the crisis-ridden sector.