Govt approves Rs 1,400cr to settle banks claims under a scheme

"The Cabinet Committee on Economic Affairs today approved provision of Rs 404 crore and also approved an addition amount of Rs 996 crore for meeting pending interest subvention claims of banks, as requested by RBI," an official statement said.

It said the measure "will mitigate the effects of global melt down across labour intensive export sectors" and help them to be internationally competitive and achieve their export targets.

Under the interest subsidy scheme, which was introduced in July 2007, the government provides interest subsidy of 2 per cent per annum to all scheduled commercial banks in respect of rupee export credit to the specified categories of exporters.

The scheme covered labour intensive sectors like textiles, leather, handicrafts, engineering products, marine products, plastics, carpets, gems and jewellery and small and medium enterprises.

The government has to extend the scheme till March 31, 2011 on pre and post shipment rupee credit. India's exports in November rose by 26.8 per cent to USD 18.9 billion year-on-year. The government is confident that the outbound shipments will touch USD 215 billion this fiscal.