UPSC Prelims 2017 · Question 14 of 99
UPSC Prelims 2017 question on S4A Stressed Assets
- ExamUPSC CSE
- Year2017
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicBanking
- DifficultyEasy
- TypeDirect
Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news?
Show answer
Answer: B. It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.
Verdict
The answer is that it is a scheme of the Reserve Bank for reworking the financial structure of big corporate entities facing genuine difficulties.
Analysis
The Scheme for Sustainable Structuring of Stressed Assets envisages determining the sustainable level of debt a stressed borrower can service, and splitting the outstanding debt into that sustainable portion and equity or quasi equity instruments, which give lenders an upside if the borrower recovers. It is therefore a debt resolution mechanism for large corporate borrowers. The ecological costing option, the disinvestment option and the Insolvency and Bankruptcy Code option all describe unrelated policy instruments.
Source
The Hindu report on the first S4A debt recast approval.
How to crack it
Read the expanded name, since Sustainable Structuring of Stressed Assets contains both the problem, stressed assets, and the method, restructuring, so the answer is contained in the title. Then place the scheme in the sequence of bad loan mechanisms of this period, from corporate debt restructuring to strategic debt restructuring to S4A and finally to the Insolvency and Bankruptcy Code, because UPSC tests which instrument does what within that chain.