Lenders to Sintex Industries Ltd. rejected a debt restructuring plan by the company and intended to push it into bankruptcy, people familiar with the matter said.

According to the resolution proposal, the textile company will be able to service only 30 per cent of its ₹6,300 crore ($888 million) of bank loans, the people said, asking not to be named, as the information isn’t public. The plan also included infusion of about ₹200 crore into Sintex by two other yarn producers, the people said.

Indian banks, saddled with the world’s worst bad-loan ratio, have been struggling to recover money from delinquent borrowers amid a prolonged credit crunch and weakening economic growth. Though banks have been increasingly pushing more cases to bankruptcy, only 15 per cent of cases admitted to the insolvency courts have been closed through a resolution plan.

Banks to the company, led by Punjab National Bank, were expecting at least 50 per cent recovery on the loans and higher cash infusion, the people said. As the loans are already classified as soured, they will need to push the company into bankruptcy by January 3, failing which an additional 20 per cent provisions have to be set aside for the loan, the people said.

Representatives of Sintex and Punjab National Bank didn’t immediately respond to emails and phone calls seeking comment.

Care Ratings Ltd. and Brickwork Ratings Ltd. had cut the ratings of Sintex Industries to default in June, citing delays in repaying bank loans and debentures. The company had reported net losses for the last three quarters, exchange filings show.

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