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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Q: 64 (IAS/2017)

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

question_subject: 

Current Affairs

question_exam: 

IAS

stats: 

0,73,84,20,73,16,48

keywords: 

{'sustainable structuring': [0, 0, 0, 1], 'stressed assets': [0, 0, 0, 2], 'financial structure': [0, 0, 0, 1], 'bankruptcy code': [0, 0, 0, 1], 'disinvestment plan': [0, 0, 0, 1], 'central public sector undertakings': [0, 0, 0, 1], 'big corporate entities': [0, 0, 0, 1], 'important provision': [0, 0, 0, 1], 'insolvency': [0, 0, 0, 1], 'ecological costs': [0, 0, 0, 1], 's4a': [0, 0, 0, 1], 'rbi': [1, 4, 2, 23], 'developmental schemes': [0, 0, 0, 1], 'term': [28, 1, 9, 27], 'scheme': [0, 0, 1, 0], 'government': [5, 0, 0, 1], 'procedure': [6, 0, 4, 13]}

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

The Scheme for Sustainable Structuring of Stressed Assets (S4A) is a scheme introduced by the Reserve Bank of India (RBI) to resolve the problem of stressed assets or non-performing assets (NPAs) of large corporate borrowers. The scheme was introduced in June 2016 to address the issue of mounting bad debts in India`s banking system.

Under this scheme, large borrowers who are facing genuine difficulties in servicing their debt obligations but have potential for revival are allowed to restructure their debt by dividing it into two parts: sustainable debt and equity/quasi-equity instruments. The sustainable debt part is the portion of debt that can be serviced from the borrower`s regular cash flows and is deemed sustainable, while the other part is converted into equity or quasi-equity instruments such as optionally convertible debentures (OCDs), which give the lender a stake in the borrower`s business.

The scheme aims to provide a resolution framework for large corporate borrowers with the help of banks and financial institutions, without having to go through the Insolvency and Bankruptcy Code (IBC) process. The S4A scheme provides an alternative to other debt restructuring mechanisms such as Corporate Debt Restructuring (CDR), Strategic Debt Restructuring (SDR), and Joint Lenders` Forum (JLF).

It is important to note that S4A is not a disinvestment plan for Central Public Sector Undertakings (CPSUs) nor a procedure for considering ecological costs of developmental schemes formulated by the Government. Therefore, Options 1 and 3 are incorrect. While the Insolvency and Bankruptcy Code (IBC) process is relevant for resolving stressed assets, S4A is a separate scheme of RBI and does not form an integral part of the IBC. Therefore, Option 4 is also incorrect.

In conclusion, the correct option that best describes the Scheme for Sustainable Structuring of Stressed Assets (S4A) is Option 2: It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.