In an another attempt to arrest rising bad loans, the Reserve Bank of India has notified the Scheme for Sustainable Structuring of Stressed Assets also known as S4A to restructure the unsustainable debt of corporates.
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For being eligible under the scheme, the borrowal account should meet the following conditions:
A debt level will be deemed sustainable if the Joint Lenders Forum (JLF)/Consortium of lenders/bank conclude through independent techno-economic viability (TEV) that debt of that principal value amongst the current funded/non-funded liabilities owed to institutional lenders can be serviced over the same tenor as that of the existing facilities even if the future cash flows remain at their current level. For this scheme to apply, sustainable debt should not be less than 50 percent of current funded liabilities.
The JLF/consortium/bank shall, after an independent TEV, bifurcate the current dues of the borrower into:
The unsustainable part shall be converted into equity/redeemable cumulative optionally convertible preference shares
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