Of course, once the banks have properly classified a non-performing loan and provisioned against it, their incentive to evergreen or avoid writing down the debt to appropriate levels is diminished. Nevertheless, clean-up is ongoing work. The SDR scheme dealt with weak promoters. But some promoters are competent even while their projects are overly indebted.
The ‘Scheme for Sustainable Structuring of Stressed Assets’ (S4A) is an optional framework for the resolution of large stressed accounts. The S4A envisages determination of the sustainable debt level for a stressed borrower, and bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity instruments which are expected to provide upside to the lenders when the borrower turns around.