Modern group was badly affected by the recession in the textile industry. Hence, an extension for repaying the outstandings has been sought, said a senior group executive in a faxed response to The Financial Express. The group's outstandings with the FIs stand at a whopping Rs 977 crore.

The FIs in May had agreed to a recast proposal by the Modern group on the condition that the promoters would bring in an initial contribution of Rs 50 crore through the sale of Modern Denim. With the denim market going down, a buyer for the unit could not be identified.

The group has also sought time till March next year for hiving off Modern Denim. Jardine Fleming has been given the mandate for finding a suitable buyer.

It is believed that the FIs are preparing to crack the whip on the group either through recall of the loans, or by initiating legal action.The recent meeting of the heads of institutions has taken a view on the matter, and has decided to take necessary steps if the recast scheme is not implemented, sources said.

However, a company official denied this by saying the group is not aware of any such action.

The group has defaulted on payments, and its recent repayments stand at a meager Rs 2.64 crore. The repayment has been made by group company Modern Insulators, which posted a profit in 1998-99.

The other group companies continued to be in the red. The group companies Modern Syntex, Modern Thread, Modern Terry Towels, and Modern Denim together posted a loss of Rs 172.49 crore in the last fiscal.

The FIs have, of late, been aggressive with textile companies which have been defaulting on a regular basis.

The latest to receive the flak is the Hyderabad-based Sanghi Polyester, which has been defaulting for the last two years. Like Modern, the FIs had also prepared a reschedulement package for Sanghi Polyester. But the company failed to stick to the payment schedules, forcing the FIs to think about a probable recall of loans, according to the sources.