India is again stepping up efforts to displace cash with cards for everyday consumer purchases.

Last week, the government announced that it will pick up the tab for merchant discount fees on debit card transactions of 2,000 rupees (US$31.16) or less. The average debit transaction in India is less than 1,500 rupees, according to a report by Times of India.

The report went on to say that the new policy will especially help small merchants that have not yet added card reader capability because they don't want to pay transaction fees.

The fee subsidization program begins Jan. 1 and will continue for two years. The program covers only debit card purchases and does not apply to credit card transactions.

The current merchant discount rate, which is set by the Reserve Bank of India, is 0.9 percent for merchants with annual sales of more than 2 million rupees and 0.4 percent for merchants with sales below that amount.