UPSC Prelims 2017 Q64: Indian Economy – Banking & Financial Sector
Which of the following statements best describes the term ‘Scheme for Sustainable
Structuring of Stressed Assets (S4A)’, recently seen in the news?
- (a) It is a procedure for considering ecological costs of developmental schemes formulated by the Government.
- (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.
- (c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.
- (d) It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.
Answer: (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.
Explanation
Scheme for Sustainable Structuring of Stressed Assets (S4A)
Introduced by the RBI in June 2016.
It helped banks rework the debt of large projects in genuine difficulty.
| Feature | Detail |
|---|---|
| Eligible | Projects with total loans above Rs 500 crore that had begun commercial operations |
| Part A | Sustainable debt (at least 50%), serviced from current cash flows |
| Part B | The rest, converted into equity or similar instruments |
| Status | Withdrawn in February 2018 under RBI's revised framework |
The options checked:
| Option | Verdict |
|---|---|
| (a) Procedure for considering ecological costs of developmental schemes | Incorrect |
| (b) Scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties | Correct |
| (c) Disinvestment plan regarding Central Public Sector Undertakings | Incorrect |
| (d) Provision in the Insolvency and Bankruptcy Code | Incorrect; S4A was an RBI scheme, separate from the Code |
Answer: (b) RBI scheme for reworking the financial structure of big corporate entities.
Why each option is right or wrong
- (a) Incorrect. S4A is about bank loans, not ecological costs of developmental schemes.
- (b) CORRECT. S4A was an RBI scheme to rework the debt of big corporate entities in difficulty.
- (c) Incorrect. It has nothing to do with disinvestment in public sector undertakings.
- (d) Incorrect. S4A was an RBI scheme, not a provision of the Insolvency and Bankruptcy Code.
Key point
S4A (RBI, June 2016): split stressed large-project debt into sustainable Part A and equity-like Part B; withdrawn in February 2018.
Remember
S4A = RBI's debt restructuring scheme, 2016.
Common mistakes
- Reading 'Sustainable' as an environmental term.
- Treating S4A as part of the Insolvency and Bankruptcy Code, 2016.
- Confusing S4A with Strategic Debt Restructuring (SDR) or the 5/25 scheme.
Exam tip
'Stressed Assets' always means bad loans of banks, so look for RBI in the options.
Sources
- Reserve Bank of India — Scheme for Sustainable Structuring of Stressed Assets (13 June 2016)
- Reserve Bank of India — Resolution of Stressed Assets: Revised Framework (12 February 2018)