As per the proposal, all high value transactions exceeding 1 lakh will have to be made through electronic mode and the utility service providers would be encouraged to give incentives for card payments.

Incentives would also be given to shopkeepers accepting major portion of their payments through plastic money.

The proposal follows an announcement made by Finance Minister Arun Jaitley in his Budget speech, wherein he had said that one way to curb the flow of black money was to discourage transactions in cash.

"Now that a majority of Indians have or can have a RUPAY debit card. I propose to introduce soon several measures that will incentivise credit or debit card transactions, and dis-incentivise cash transactions," Mr Jaitley had said.

Finance Ministry had in June put up for public comments the draft proposals for facilitating electronic transactions.

"Almost all the proposals mentioned in the draft have been incorporated in the Cabinet note. Besides, certain comments from public too have been included," the source said.

As per the draft proposal, merchants could get a tax benefit for accepting 50 per cent of payment in electronic mode.

At present, there are about 57 crore debit cards and over 11 lakh point of sale (PoS) terminals in India.