The Reserve Bank of India (RBI) has issued guidelines called Scheme for Sustainable Structuring of Stressed Assets (S4A).

The main aim of these guidelines is to

(i)           Strengthen the lenders’ ability to deal with stressed assets and

(ii)         (ii) Put real assets back on track of entities facing genuine difficulties by providing an avenue for reworking financial structure.

 The RBI has formulated the S4A as an optional framework for the resolution of large stressed accounts. The S4A envisages determination of sustainable debt level of a stressed borrower and bifurcate outstanding debt into sustainable debt and equity/quasi-equity instruments. The sustainable debt and equity/quasi-equity instruments are expected to provide upside to the lenders when the borrower turns around.