NEW DELHI (AFP) - Tens of thousands of Indian villages will soon be equipped with card-swiping machines to boost cashless payments, the finance minister said Thursday (Dec 8), a month after the government banned high-value banknotes.

Prime Minister Narendra Modi unleashed chaos with his shock announcement last month that all 500 and 1,000 rupees (S$10.55, S$21.11) notes - some 85 per cent of all bills in circulation - would cease to be legal tender.

The move triggered a chronic shortage of cash with people forming long queues outside banks across the country for hours to get rid of their old notes.

Cash accounts for 90 per cent of transactions in India where millions rely heavily on notes for their daily transactions.

People living in rural areas and individuals without bank accounts have been particularly hard hit.

To ease frustrations and speed up the switch to cashless spending, Finance Minister Arun Jaitley announced a slew of measures to incentivise the so-called demonetisation drive, including card-swiping machines for villages.

"There will be two point-of-sale machines provided to every village which has a population up to 10,000 and 100,000 villages will be selected for this purpose," Jaitley said at a press conference.

"This will benefit farmers covering a total population of nearly 750 million," he said.

The sweeping abolition was meant to bring billions in so-called "black", or undeclared, money back into the formal system.

Many have been left without enough cash to buy food or daily essentials, while farmers have been unable to buy seeds and small traders say business has fallen off a cliff.

Nonetheless Modi has repeatedly defended the scheme, accusing its detractors of being tax evaders and repeatedly urging all Indians to switch to non-cash payment methods.