Cabinet Approves Additional Funds of Rs. 2050 Crs under Interest Subvention Scheme for SMEs

[Ref: PIB (MoC&I) Press Release dated 1 December 2011]

The Cabinet Committee on Economic Affairs today approved the proposal of the Department of Commerce for additional funds under the Interest Subvention scheme to the tune of Rs.2050 crore i.e. Rs.1250 (RBI projection, for period upto March 2011) plus Rs.800 (as indicated by Department of Financial Services for the period 1st April 2011 to 31st March, 2012).

The Government of India has extended the scheme upto March 31, 2012 for Handicrafts, Handlooms, Carpets and Small & Medium Enterprises (SME) sectors.

Till date, Rs.1654 crore has been released to RBI for reimbursement of interest subvention claims whereas total requirement projected by RBI for the period upto March 2011 is Rs.3892 crore. Hence, the balance of Rs.2238 crore is pending. Out of Rs.2238 crore, Department of Commerce has approval of CCEA for Rs.996 crore, leaving Rs. 1250 (approx.) for which approval is given today. Rs. 996 crore will be released to RBI as and when the funds are made available to Department of Commerce under the relevant head.

Meanwhile, Department of Financial Services had indicated an additional financial implication of Rs.800 crore in view of the decision of the Government of India to extend the scheme w.e.f. 1st April 2011 to 31st March 2012 for the sectors, namely, Handicrafts, Handlooms, Carpets and Small & Medium Enterprises.

The interest subvention scheme was introduced in July 2007 vide RBI notification dated 13.7.2007 on the advice of Ministry of Finance to help exporters offset the losses on account of global recession. In this scheme, which is operated by the Reserve Bank of India, Government provides interest subvention of 2 percentage points per annum to all scheduled commercial banks in respect of rupee export credit to the specified categories of exporters.