The system, which has never been tried elsewhere on this scale, is currently available to customers of 21 banks
India has launched its Unified Payments Interface (UPI) with which users will be able to initiate payment requests using a smartphone.
The initiative, launched by the National Payments Corporation of India, is available to customers of 21 banks.
The platform identifies the user using a 'virtual payment address', after which he or she can send and receive money over a smartphone.
Indian Prime Minister Narendra Modi had in May talked about the country becoming a "cashless society", as this was crucial to curbing the presence of black money in the economy.
"Real-time sending and receiving money through a mobile application at such a scale on inter-operable basis had not been attempted anywhere else in the world. Now the UPI app will be made available on Google Play Store by banks," NPCI Managing Director and CEO AP Hota said in a statement.
Raghuram Rajan, the outgoing governor of India's central bank, had announced a soft launch of the interface in April 2016.
The interface has so far been under trial, with employees and customers using the system. The trial run also allowed developers to catch any technical glitches and correct them, NPCI said.
Axis Bank, Vijaya Bank, Andhra bank and, Canara Bank are among the 21 involved in the programme.
NPCI had decided that only banks with 1,000 pilot customers, 5,000 transactions and a success rate of around 80 per cent would be permitted to go live.
"Such a threshold criteria helped banks to refine their systems and procedure," Hota said.
UPI offers a number of features, for example it allows people to share bills, and the app can also be used in place of paying cash on delivery while shopping online.
Utility bills and school fees, among others, can be paid using UPI.
(WION with inputs from PTI)