"under the shade of a verdant forest" is how I've seen it translated.
To be frank, the Bengali version is not exactly straight-forward - probably deliberately for poetic effects. As you'd guess, literally it is "(to the) shades of forests of verdant soil". There are certain poetic devices in work, but I don't like to dissect them too much, as I feel, that defeats the purpose. The English version you quoted is a decent paraphrase, I think.
মাটির means miTTii kii doesn't it?
Yes, you are totally right.
Does বনছা mean forest shade and য় is added to put it in the locative case??
No. This is the tricky part. There are two things that can probably be agreed upon without controversy:
1) There is no word "বনছা
", the word in nominative singular indefinite is "বনছায়া".
2) The form "
বনছায়" is exclusively poetic.
That brings us back to your question: what grammatical form is this "
বনছায়"? The answer is anything but "pretty basic".

The thing is that some Bengali nouns can optionally have a distinct "oblique stem" in poetry - at least in front of the (locative/instrumental) case ending -e, and this stem is formed by dropping the final vowel of a vowel-final noun, e.g. ভূমি > ভূমে (e.g. "নিজ
ভূমে পরবাসী" (set-phrase) = expatriate in one's own land), ধূলা/ধূলি > ধূলে (e.g. "অহল্যা পাষাণী ছিল, সেও তো মানব হলো প্রভুর চরণ
ধূলে।" = "Ahalya had turned to stone, but even she turned (back) human by (the touch of) the dust of the Lord's feet" - Lalon Fakir), etc. The word "ছায়া" also belongs to this group, e.g.
"মৃদুল
বায়ে বকুল
ছায়ে
গোপন পায়ে কে ঐ আসে?" - Kazi Nazrul Islam
= "Who is it, that comes in secret foot-steps in the shade of the Bakul trees in the soft breeze?"
Note that this verse contains another example: বায়ু > বায়ে (in wind, air, breeze).
So, there would be no problem if your verse had "বনছায়ে", as that would be this kind of a locative form. But why the lack of the ending -e?
In my view, it is still the locative form, but it has lost the -e (or rather, contracted it) probably because of some quirk of Bengali phonology (btw. the usage sounds perfectly grammatical - however forced my explanation may sound). Most likely what is going on here is that the form, which is nominally "chhaye", would invariably be realized as "chhae" (2 syllables), as y is always dropped before -e; and then this form might contract to the single syllable "chhay", as is usual also with forms like pa+-e > "pae" (spelt "পায়ে")/"pay" (spelt "পায়") (at foot). One tell-tale piece of poetry gives the best evidence here:
"তুমি যাবে, ভাই, যাবে মোর সাথে আমাদের ছোট গাঁয়,
গাছের
ছায়ায়, লতায়-পাতায়, উদাসী বনের
বায়?
মায়া-মমতা জড়াজড়ি করি'
মোর গেহখানি রহিয়াছে ভরি'
মায়ের বুকেতে, বোনের আদরে, ভাইয়ের স্নেহের
ছায়,
তুমি যাবে ভাই, যাবে মোর সাথে আমাদের ছোট গাঁয়?" - Jasimuddin
"Will you go, my friend (=brother), with me to our small village,
to the shades of trees, to the vines and leaves, to the melancholy forest breeze?
Suffused with tenderness,
my home is full
in the bosom of (my) mother, in the caresses of (my) sister(s), in the shades of the affection of (my) brother(s),
Will you go, my friend (=brother), with me to our small village?"
In this piece, the contractions (বায়ু+-এ>) বায়ে > বায় and (
ছায়া+-এ>) ছায়ে > ছায় have both been used (It also contains the "full" or "standard" form "ছায়ায়" as well). I hope that explains this usage, though it is obviously not a "basic Bong grammar" stuff. The grammar of Bengali poetry can unfortunately be quite challenging for non-natives, as it admits lots of non-(prose-)standard variations, like free mixing of forms from sadhu and cholit standards, many dialectal/regional forms, as well as specifically poetic forms like what we discussed here.
To summarise,
ছায়া+-এ = prose-standard ছায়ায় (chhayay); but poetic also ছায়ে (chhae) and ছায় (chhay).