Monday, September 19, 2016

RBI norms for stressed assets - S4A

S4A stands for scheme for sustainable structuring of stressed assets.
S4A Scheme 

  • Under this, banks can convert a portion of loans they are owned into equity.
  • The idea is that if the company does well in the years to come, banks should benefit.
  • This lowers the overall debt burden.
  • Terms for remaining loan amount,(sustainable debt) can't be changed.

RBI has hinted that loan should be structured in a way that it accelerates repayment if cos make
unexpected gains. The formula for assessing sustainable debt -- cash flow available from the 
current or immediate level of operations. The formula for assessing sustainable debt -- cash
flow available from the current or immediate level of operations.

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