The Hindu Business Line : Create fund for sugar industry, RBI tells banks

Mumbai, July 11 The Reserve Bank of India has authorised banks to create a fund of Rs 798 crore for the sugar industry, which would have to be used exclusively for payment of cane arrears to farmers.

This follows the Government’s decision earlier, to create a buffer stock of 20 lakh tonnes of sugar for a period of one year with effect from May 1. Under this arrangement, the Government will release a subsidy of Rs 378 crore out of the Sugar Development Fund for crediting to the account of individual sugar mills and banks have also been asked to waive margin requirement on the buffer stock inventory which translates into additional credit entitlement for the sugar industry assessed at Rs 420 crore.

Together with the subsidy released by the Government, the fresh funds available for payment of cane arrears works out to a total of Rs 798 crore.

The RBI in a notification issued on Wednesday has also asked banks to ensure that no operations on the separate account kept for buffer stocks be allowed for any other purpose and withdrawals from stocks earmarked as buffer stocks are not permitted.

“The interest on the separate account for buffer stock may be debited to the regular cash credit account.”

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