Which of the following measures taken by RBI to manage bad loans is are correctly matched 1 5 25 sch...........

Economic Affairs Types of Banks and Banking

Which of the following measures taken by RBI to manage bad loans is/are correctly matched?

1. 5:25 scheme : RBI allows the lenders to extend the maturity of loans to projects in the infrastructure and core industries sector, for 25 years.

2. Strategic Debt Restructuring scheme (SDR) : Banks can convert a part of the debt of the stressed entity into majority equity. This scheme offers the banks to run the management of the stressed entity.

3. Scheme for Sustainable Structuring of Stressed Assets (S4A) : Large ticket loans are restructured by separating a sustainable loan from an unsustainable loan.

Choose the correct code

2 only

1 and 3 only

3 only

All of the above

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Explanation:

5:25 scheme
This scheme was introduced in December 2014. Under this scheme, RBI allows the lenders to extend
the maturity of loans to projects in the infrastructure and core industries sector, for 25 years.
Strategic Debt Restructuring scheme (SDR)
This scheme was introduced in June 2015. Under this scheme, banks can convert a part of the debt of
the stressed entity into majority equity. This scheme offers the banks to run the management of the
stressed entity.
S4A
Under this scheme, large ticket loans are restructured by separating a sustainable loan from an
unsustainable loan. The lenders are required to make this classification. Sustainable level of debt is
one which the banks think the stressed borrower can service with its current cash flows. This
sustainable level of debt should not be less than half the loans or funded liabilities of the stressed
entity. Banks can convert the unsustainable debt into equity or equity related instruments, which are
expected to provide upside to the lenders in case the borrower cannot regain the glory and rework
the financial structure.