Which of the following statements best describes the term lsquo Scheme for Sustainable Structuring o...........

Economic Affairs Types of Banks and Banking

Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news?

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UPSC CSP Previous Year Paper (2017)

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It is a procedure for considering ecological costs of developmental schemes formulated by the Government.

It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.

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Explanation:

The RBI’s Scheme for Sustainable Structuring of Stressed Assets (S4A) allows banks to separate the total debt of a stressed company into two. While the company will service the sustainable part of debt, the rest is converted into equity.

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.