I cant install any free apps. Its asking to add payment method for this.

Apple requiring a payment method such as a credit or debit card, even for free apps or where you have enough account balance to pay for the item, is not an uncommon observation. Some possible reasons are outlined in the links below such as outstanding balance, an issue with a payment method you have currently entered, ongoing subscriptions, or simply because they say so. You can try to configure your account to not have a payment method but you may find there is no option other than to enter a valid payment method to satisfy one of Apple's requirements. If the item is free you will not be charged. If it costs something, your Apple ID balance will in most cases be used first. You can later try to remove the payment method and see if it only needs to be there temporarily.

If you can’t download or update apps on your iPhone or iPad - If you can’t download or update apps on your iPhone or iPad - Apple Support

- "You might need to have a payment method on file, even if the app that you want to download is free." If you have something else on your account that requires a payment method, such as a subscription, and your current payment method is not working then Apple won't let you download even free things until you fix the payment method. This is explained in this document, 'If your payment method is declined in the App Store or iTunes Store' - If your payment method is declined in the App Store or iTunes Store - Apple Support

If you can't remove your last payment method or use no payment method with your Apple ID - Remove a payment method from your Apple ID - Apple Support

- If you have any active subscriptions, you must have at least one payment method on file other than Apple ID credit.

- You might not be able to remove a payment method if you have a balance due.

Sign in with your Apple ID - Apple Support - at the very bottom: "When you sign in to the App Store and other media services for the first time, you might need to add a credit card or other payment information."

Also:

How App Store and iTunes Store purchases are billed - How apps, content, and subscriptions from Apple are billed - Apple Support

Some purchases aren’t charged to your Apple ID balance

- You can’t charge gifts to your Apple ID balance. If you send a gift or gift card, your primary payment method is charged.

- Some subscriptions might not be charged to your Apple ID balance.

And:

What you can buy with your Apple Gift Card or Apple Account balance - Apple Support

"Some purchases might require that you have a credit card on file, even if you use your Apple Account balance to make the purchase."

So, the resolution will be to add a payment method:

This document explains how to change, add, review, or remove Apple ID payment methods on a Mac or Apple mobile devices; click here --> Add a payment method to your Apple ID - Apple Support

If you still have problems Click here --> Choose your country or region - Official Apple Support Select your country, then a product. If you don't see one that handles your issue then keep experimenting with selections until you reach one that gets you a chat session or a telephone call and get the representative to redirect you.

or:

Contact Apple for support and service --> "See a list of Apple phone numbers around the world." - Contact Apple for support and service - Apple Support