Question

UPSC Prelims 2017 Question:

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

1. It is a procedure for considering ecological costs of developmental schemes formulated by the Government.
2. It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.
3. It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.
4. It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.

Answer (Detailed Solution Below)

Option 2: It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

Detailed Solution

Explanation:

The Reserve Bank of India (RBI) has issued guidelines on a ‘Scheme for Sustainable Structuring of Stressed Assets’ in order to further strengthen the lenders’ ability to deal with stressed assets and to put real assets back on track by providing an avenue for reworking the financial structure of entities facing genuine difficulties.
Accordingly, the RBI, after due consultation with lenders, has formulated the ‘Scheme for Sustainable Structuring of Stressed Assets’ (S4A) as an optional framework for the resolution of large stressed accounts. The S4A envisages the determination of the sustainable debt level for a stressed borrower and the bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity instruments which are expected to provide an upside to the lenders when the borrower turns around.

Therefore, option (2) is the correct answer.

Subject: Economics | Money and Banking

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