{"id":1772,"date":"2024-03-29T21:16:40","date_gmt":"2024-03-29T15:46:40","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1772"},"modified":"2024-04-03T07:11:23","modified_gmt":"2024-04-03T01:41:23","slug":"q-which-of-the-following-statements-best-describes-the-term-scheme-for-sustainable-structuring-of-stressed-assets-s4a-recently-seen-in-the-news","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-which-of-the-following-statements-best-describes-the-term-scheme-for-sustainable-structuring-of-stressed-assets-s4a-recently-seen-in-the-news","title":{"rendered":"Q.\u00a0Which of the following statements best describes the term \u2018Scheme for Sustainable Structuring of Stressed Assets (S4A)\u2019, recently seen in the news?"},"content":{"rendered":"\n<ul class=\"mcq wp-block-list\">\n<li>It is a procedure for considering ecological costs of developmental schemes formulated by the Government.<\/li>\n\n\n\n<li>It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.<\/li>\n\n\n\n<li>It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.<\/li>\n\n\n\n<li>It is an important provision in The Insolvency and Bankruptcy Code\u2019 recently implemented by the Government.<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer:<\/strong>&nbsp;<strong>(b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"notes-hd-6606dc9bd8e5a\">Notes:<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Scheme for Sustainable Structuring of Stressed Assets also known as S4A Scheme was&nbsp;<strong>launched on 13th June 2016 by the Reserve Bank of India<\/strong>&nbsp;as an initiative&nbsp;<strong>to address and resolve the debt issues of the corporate sector along with strengthening the ability of the lender to deal with stressed assets<\/strong>.<\/li>\n\n\n\n<li>As per the S4A scheme, the debt of a company is bifurcated into\u00a0<strong>two parts<\/strong>\u00a0namely\u00a0<strong>sustainable and unsustainable debt<\/strong>\u00a0based on the cash flows of the company\u2019s project.\n<ul class=\"wp-block-list\">\n<li>The\u00a0<strong>sustainable debt of a company should not be less than 50%<\/strong>\u00a0of the existing debt and the unsustainable debt can be converted into optionally convertible debentures.\n<ul class=\"wp-block-list\">\n<li>Banks can sell this stake or equity to a new owner who will have the advantage of getting to run the business with a more manageable debt.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>RBI mandated advisory body called&nbsp;<strong>Overseeing Committee (OC)<\/strong>&nbsp;will be constituted, which will review the resolution plans submitted by the Banks.<\/li>\n\n\n\n<li>The\u00a0<strong>main aims of the S4A scheme are<\/strong>:\n<ul class=\"wp-block-list\">\n<li>The scheme aims to provide&nbsp;<strong>financial restructuring of large debted projects<\/strong>&nbsp;by allowing the bank\u2019s lender in acquiring equity of the stressed project.<\/li>\n\n\n\n<li><strong>To restore the credit flow<\/strong>&nbsp;to the critical sectors along with restoring the infrastructure.<\/li>\n\n\n\n<li><strong>To restore the issues faced by the real assets<\/strong>&nbsp;by providing an avenue for reworking financial structure.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Some of the\u00a0<strong>major benefits provided by the S4A scheme&nbsp;<\/strong>are:\n<ul class=\"wp-block-list\">\n<li>The scheme helps the banks&nbsp;<strong>to speed up the asset recovery process and also to&nbsp;manage their NPAs<\/strong>. For the fiscal year 2015-16, the Non-Performing Assets (NPAs) has touched Rs. 6 lakh crore.<\/li>\n\n\n\n<li>The S4A Scheme also provides another&nbsp;opportunity for the borrowers to rework its financial structure.<\/li>\n\n\n\n<li>The scheme&nbsp;<strong>saves the banks from undue scrutiny through the oversight of an external Overseeing Committee (OC)&nbsp;<\/strong>which also ensures transparency. The endorsement of the OC is very important for the approval of any loan under the S4A scheme.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Main features of the S4A scheme<\/strong>:\n<ul class=\"wp-block-list\">\n<li>Under the S4A scheme, an account is considered eligible for restructuring if the total loans in the account by all the institutional lenders&nbsp;<strong>exceeds Rs. 500 crore<\/strong>&nbsp;which includes the rupee loans as well as the foreign currency loans.<\/li>\n\n\n\n<li>An&nbsp;<strong>independent agency<\/strong>&nbsp;is hired by the lending bank for evaluating sustainable debt.<\/li>\n\n\n\n<li>The projects that are under the S4A Scheme should have started their commercial operations and also allow the banks to take part in the stressed project.<\/li>\n\n\n\n<li>The scheme also protects bankers from undue scrutiny by allowing the banks to rework on stressed loans.<\/li>\n\n\n\n<li>One of the main features of this scheme is the<strong>&nbsp;test of sustainability<\/strong>&nbsp;as it allows the evaluation of the level of sustainable debt for a stressed borrower. Under the S4A scheme, the loans are divided into sustainable and unsustainable components.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"insolvency-and-bankruptcy-code-ibc-2016\">Insolvency and Bankruptcy Code (IBC), 2016<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The IBC, 2016 is the\u00a0<strong>bankruptcy law of India<\/strong>\u00a0that consolidates and amends the\u00a0<strong>existing laws relating to insolvency and bankruptcy<\/strong>\u00a0of corporate persons, partnership firms, and individuals.\n<ul class=\"wp-block-list\">\n<li>Insolvency is a state where the&nbsp;<strong>liabilities<\/strong>&nbsp;of an individual or an organization&nbsp;<strong>exceeds its asset<\/strong>&nbsp;and that entity is unable to raise enough cash to meet its obligations or debts as they become due for payment.<\/li>\n\n\n\n<li>Bankruptcy is when a person or company is&nbsp;<strong>legally declared incapable of paying their due and payable bills.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The IBC aims&nbsp;<strong>to provide a time-bound and creditor-driven process for insolvency resolution and to improve the credit culture and business environment<\/strong>&nbsp;in the country.<\/li>\n\n\n\n<li>IBC resolves claims involving insolvent companies. This was intended to tackle the bad loan problems that were affecting the banking system.<\/li>\n\n\n\n<li><strong>Regulating Authority:<\/strong>\n<ul class=\"wp-block-list\">\n<li>The Insolvency and Bankruptcy Board of India (IBBI) was&nbsp;<strong>established under the Insolvency and Bankruptcy Code, 2016.<\/strong><\/li>\n\n\n\n<li>It is a statutory body, responsible for making and implementing rules and regulations for insolvency and bankruptcy resolution of corporate persons, partnership firms, and individuals in India.<\/li>\n\n\n\n<li>The IBBI has 10 members, representing&nbsp;<strong>the Ministry of Finance, the Ministry of Corporate Affairs<\/strong>,and the&nbsp;<strong>Reserve Bank of India.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Adjudicating Authority:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>National Company Law Tribunal (NCLT)<\/strong>&nbsp;has jurisdiction over companies, other limited liability entities.<\/li>\n\n\n\n<li><strong>Debt Recovery Tribunal (DRT)<\/strong>&nbsp;has jurisdiction over individuals and partnership firms other than Limited Liability Partnerships.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h6 class=\"wp-block-heading\" id=\"insolvency-and-bankruptcy-board-of-india\">Insolvency and Bankruptcy Board of India<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Insolvency and Bankruptcy Board of India was&nbsp;<strong>established in 2016<\/strong>&nbsp;under the&nbsp;<strong>Insolvency and Bankruptcy Code, 2016 (Code).<\/strong><\/li>\n\n\n\n<li>It is a key pillar of the ecosystem responsible for<strong>&nbsp;implementation of the Code<\/strong>&nbsp;that consolidates and amends the laws relating to<strong>&nbsp;reorganization and insolvency resolution of corporate persons, partnership firms and individuals<\/strong>&nbsp;in a time bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders.<\/li>\n\n\n\n<li>It is a&nbsp;<strong>unique regulator<\/strong>&nbsp;as it regulates a profession as well as processes.<\/li>\n\n\n\n<li>It has&nbsp;<strong>regulatory oversight<\/strong>&nbsp;over the Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities and Information Utilities.<\/li>\n\n\n\n<li>It has also been designated as th<strong>e \u2018Authority\u2019 under the Companies (Registered Valuers and Valuation Rules), 2017<\/strong>&nbsp;for regulation and development of the profession of valuers in the country.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Answer:&nbsp;(b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties. Notes: Insolvency and Bankruptcy Code (IBC), 2016 Insolvency and Bankruptcy Board of India<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[56],"class_list":["post-1772","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-56"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":56,"label":"2017"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1772","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1772"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1772\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1772"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1772"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1772"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1772"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}