The union cabinet on Wednesday approved payments through (electronic) cards and digital means to reduce cash transactions, an official statement said.
"Promotion of payments through cards and digital means will be instrumental in reducing tax avoidance, migration of government payments and collections to cashless mode, " the statement said.
Digital payments include steps for withdrawal of surcharge, service charge convenience fee on card and those impose by government departments.
The cabinet meet, chaired by Prime Minister Narendra Modi also approved ministries, department and state - run organisations to implement the new payment mode over the next two years.
"The move aims to discourage transactions in cash by providing access to financial payment services to citizens, to conduct transactions through card/digital means and shifting payment eco system from cash dominated to non - cash/less cash payments, " the statement noted.
The Reserve Bank of India has recently approved licences for setting up of payments banks for greater financial inclusion by providing small savings accounts and payments or remittance services to migrant labour workforce, low income households, small businesses and other unorganised sector entities.