New Delhi, Jan 24 (PTI): In relief to farmers who reeled under cash crunch on account of demonetisation, the government today decided to waive Rs 660.50 crore interest on short-term crop loan for November-December 2016 and grant Rs 400 crore to Nabard to bear refinancing cost of co-operative banks.

A decision in this regard was taken at the Cabinet meeting, chaired by Prime Minister Narendra Modi, to help farmers who faced hardships because of scrapping of Rs 500 and Rs 1,000 notes from November 8 mid-night.

"The Cabinet today approved interest waiver of Rs 660.50 crore for two months (November-December 2016) for farmers who have taken short-term loans from co-operative banks," Agriculture Minister Radha Mohan Singh told PTI after the meeting.

According to a government release, the Cabinet has approved Rs 1,060.50 crore towards "the cost of interest waiver for two months (November-December, 2016) for crop loan disbursed by co-operative banks between April 1 2016 and September 30 to farmers and providing interest subvention and administrative cost to Nabard on short-term borrowing of about Rs 20,000 crore for on-lending to cooperatives banks in the current financial year".

According to the proposal, farmers who have paid interest on short-term loans during the demonetisation period of November and December will get the refund in their bank accounts through direct benefit transfer (DBT).

He said further a sum of Rs 15,000 crore allocated during 2016-17 to implement the Interest Subvention Scheme (ISS) has already been utilised.

The government, the release said, waived the interest on short-term crop loans as farmers faced difficulty following cancellation of legal tender character of old Rs 500 and Rs 1,000 notes.

They faced problems in encashing the cheques received against sale proceeds of their kharif (summer) produce in mandis. Inadequacy of cash constrained the farmers in carrying out rabi (winter) sowing operations and servicing the interest of the short-term crop loans, especially in view of the restrictions imposed on co-operative banks, it said.

The government provides short-term crop loans up to Rs 3 lakh at subvented interest rate of 7 per cent per annum. An additional incentive of 3 per cent is provided to farmers for prompt repayment of loans within due date.

For 2016-17, the government has set a target to disburse agri credit of Rs 9 lakh crore, of which Rs 7.56 lakh crore has been disbursed to farmers till September of this year, as per the official data.