City authorities have set up a website to allow people to check the status of their applications, and if any cases are not processed in time a fine will be levied automatically on the responsible officer.
Each day of delay will cost the officer 10 rupees (two cents) up to a maximum of 200 rupees, the Delhi state government said on the website.
Corruption among officials has become a hot topic in India with huge nationwide protests last month in support of Anna Hazare, a popular anti-graft activist who went on a 13-day hunger strike.
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The Congress party-led government was seen as badly damaged by the protests after Hazare was briefly arrested and denounced in parliament by Prime Minister Manmohan Singh.
In theory, Delhiites can now expect to renew a driving licence within 24 hours, get a birth certificate in a week, and have an electricity connection installed in five weeks.
However, many Delhi residents are likely to take a sceptical view of the promise to impose financial