"The Cabinet approved allocation of Rs 10 crore for the ongoing academic year," Minorities Development minister Naseem Khan told reporters here after the cabinet meeting.
Around two lakh students study in madrassas in the state, which has about 3,000 such seminaries.
"The decision has been taken in keeping with the Justice Sachar Committee's recommendation to bring those studying in madrassas into the mainstream," Khan said.
This year, 200 madrassas will be provided financial assistance, he said.
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The madrassa students, who study in ninth or tenth class in nearby schools, will get annual scholarship of Rs 4,000, he said, adding that the amount will be Rs 5,000 for 11th and 12th class students.
The Cabinet also decided to stop grants to madrassas, which failed to ensure their students appeared for class 10th exam.
The objective of the Cabinet decision is to impart regular education in madrassas along with religious education, Khan said.