The EMI clock will start ticking from Tuesday — as the loan moratorium has officially ended amid a lack of clarity on the new debt recast scheme.

Finance minister Nirmala Sitharaman is due to hold talks with bankers on Thursday and the RBI is scheduled to come out with a notification on September 6.

But before that the K.V. Kamath committee will have to submit its report to enable the RBI to finalise its views before coming out with its notifications for corporate borrowers.

RBI governor Shaktikanta Das had said the banks could kick start the process of picking the borrowers who would qualify for the debt recast without waiting for the RBI notification.

However, they will have to pass board-level resolutions on their debt recast scheme before they do so. No one has called for such a board meeting and the PSU banks presumably will do so after the interaction with Sitharaman.

The six month loan moratorium had expired on Monday with no statement coming from the Reserve Bank of India (RBI) on whether it will be extended further at the time of going to press.

While this would indicate that the central bank has not extended the scheme, it is also in line with statements made by the RBI governor recently that the moratorium was only a temporary measure and that the debt restructuring scheme will provide more durable relief to borrowers affected by the pandemic.

The RBI had in March announced a three month EMI holiday (from March 1 till May 31) which was later extended by another three months to August 31.

Ahead of the deadline, there have been calls for the moratorium to be extended. Last Friday, the Supreme Court decided to hear a fresh plea seeking extension till December last the scheme to provide the facility of deferred payments of installments of term loans.

The lawyer told the bench that the adverse impact of the pandemic was still there and the scheme needed to be extended till the year end.

While there are concerns that banks could start to see a rise in their bad loans once the moratorium ends and asset recognition starts, a comforting factor is that various lenders have reported lower number of customers opting for the loan holiday after May.

According to rating agency Crisil, most companies that availed loan moratoriums have sub-investment grade ratings and were facing challenges before the onset of the pandemic itself due to slowing economic growth.

The agency which analysed 2,300 non-financial sector companies which have taken recourse to non-payment of loans, found that three-fourths of entities are sub-investment grade.

It added that the moratorium has provided much-needed liquidity support to mid-sized sub-investment grade companies rated 'BB+' or lower and has also prevented a sharp weakening in their credit profiles. Only one out of four companies that availed the moratorium is rated in the investment grade, the agency said, adding that they took recourse to the dispensation to build a liquidity cushion for exigencies in the near term.

The central bank had also announced the constitution of a committee under the chairmanship of K V Kamath to make recommendations on the required financial parameters to be factored in the resolution plans, with sector specific benchmark ranges for such parameters. This is expected to be implemented by September 6. Incidentally one member of the panel-Diwakar Gupta will join only on September 1 after completion of his term at Asian Development Bank.

However, the RBI Governor has clarified that the panel’s recommendations will only apply to corporate loans and that it will decide on financial parameters like the acceptable debt-equity ratio relating to a resolution. He had also said that banks can being to restructure stressed accounts (due to the pandemic) while disclosing that various bank boards will decide by the August end their eligibility criteria to decide which borrowers — retail and business — will qualify for resolution. However, so far no bank has formally announced such a criteria.