New Delhi (PTI): Banks will get interest of over Rs 3,500 crore on their outgo for the farm debt waiver scheme from second installment of such reimbursements due in 2009.

"The Union Cabinet today approved granting of interest amounting to Rs 3,872 crore on the balance amount i.e. the second, third and fourth installments of reimbursable claims of the lending institutions pertaining to the scheme to be paid by July 2009, July 2010 and July 2011 respectively," I&B Minister P R Dasmunshi told reporters in New Delhi.

Debt waiver and debt relief scheme benefited 3.01 crore small and marginal farmers and 0.67 crore 'other farmers'.

Banks and co-operative credit institutions are expected to get over Rs 55,000 crore as reimbursement from the government, excluding interest, for their outgo on the debt waiver scheme.

They are likely to get the first tranche of instalment amounting to Rs 25,000 crore by this month end or early November.

The other installments, on which interest is approved by the government, is slated to be given from July 2009.

The second installment would be of Rs 15,000 crore and the third installment Rs 12,000 crore scheduled to be given in July 2010.

The balance amount would be given in July 2011, as per the schedule drawn by the government in consultation with RBI.

The RBI has asked banks to make adequate provision for the loss in present value terms on the amount receivable from the government under the scheme as they would get reimbursement in phases and if they do not get interest payment.

The discount rate for arriving at such loss, as per RBI, is 9.56 per cent which is the same as the rate of yield to maturity on 364 days government treasury bills.