Greek Prime Minister Alexis Tsipras has announced a temporary closure of banks, after the European Central Bank (ECB) said it would not increase additional emergency funding to the country.
In a television address on Sunday, Tsipras said that the government will also start imposing capital controls ahead of a looming deadline on Tuesday.
The country needs to make a $1.8bn payment to the International Monetary Fund by Tuesday or risk defaulting on its obligations.
The emergency measures were agreed at a cabinet meeting after a gathering of Greece's systemic stability council, called after Eurogroup eurozone finance ministers refused to extend its bailout beyond Tuesday.
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Greek government officials have confirmed that banks will remain closed until July 6 - a day after the planned referendum on bailout deal offered by international creditors.
However, officials said that ATMs will reopen on Monday afternoon, with daily withdrawal limit set at 60 euros ($66).
The leftist government in a statement also clarified that tourists staying in Greece and anyone with a credit card issued in a foreign country will not be affected by measures to limit bank withdrawals.
Reuters news agency is reporting that the Greek stock exchange will also be kept closed on Monday.
In a statement released earlier on Sunday, the ECB said: "Given the current circumstances, the Governing Council decided to maintain the ceiling to the provision of emergency liquidity assistance [ELA] to Greek banks at the level decided on Friday."
However, the ECB said it was working with the Bank of Greece to maintain financial stability in the country and that "the Governing Council stands ready to reconsider its decision" not to increase the amount of emergency funding.
Japan stocks plunged more than two percent on Monday, with investor sentiment hit by fears of a Greek default. The Nikkei went down more than 500 points at one point during early trading.
The latest development came as the Greek parliament decided to back Tsipras' call for a referendum on the country's bailout deal with international creditors.
The referendum planned for Sunday July 5 was approved by at least 179 deputies out of a total of 300 politicians.
The creditors have not sought our approval but have asked for us to abandon our dignity. We must refuse.
Tsipras' leftist Syriza party and allied politicians voted in favour of the referendum that has angered its creditors who earlier rejected the debt-ridden country's request for a bailout extension.
In a speech prior to the vote, Tsipras said he was confident that "the Greek people will say an emphatic no to the ultimatum" by the country's creditors - the International Monetary Fund, ECB and European Commission.
"The day of truth is coming for the creditors, the time when they will see that Greece will not surrender, that Greece is not a game that has ended," he said in an address to parliament laced with references to democracy and national dignity.
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Tsipras also expressed confidence that "in the aftermath of this proud 'no', the negotiating power of the country [with the country's creditors] will be strengthened".
The move comes after five months of stalemated negotiations, with Tsipras accusing creditors of trying to strong-arm his country into taking harsh austerity measures he says would hammer an economy already on its knees after five months of creditor-demanded spending cuts and tax hikes.
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"The creditors have not sought our approval but have asked for us to abandon our dignity. We must refuse," Tsipras said during a nearly 13-hour parliamentary session that cumulated in a vote just before 3am on Sunday.
Austria's finance minister said on Sunday that Greece's exit from the eurozone "appears almost inevitable", after EU leaders refused to extend Athens's desperately needed bailout after the call for the referendum .
Also on Sunday, European Council President Donald Tusk said that Greece must remain part of the euro single currency area, adding that he was in touch with government leaders to prevent Athens dropping out of the monetary union.
Source: Al Jazeera and agencies