Prime Minister Narendra Modi, in an unexpected address to the nation on Tuesday, said that the country was doing away with Rs 500 and Rs 1,000 notes in an effort to weed out corruption, black money and in turn poverty and terrorism. Modi said that the government believes the time has come to "take a strong decision" on tackling these problems, suggesting that counterfeit notes from across the border were being used to fund terrorism in India.
How this will affect you
Starting midnight on November 8, Rs 500 and Rs 1,000 notes will no longer be legal tender. Other currency notes – Rs 100, Rs 50, Rs 20 and Rs 10 – are still valid, as are all coins. However, all cashless transactions, such as cheques, cards and demand drafts, will continue as usual.
ATMs across the country will be closed on November 9, and they will not function in parts of the country on November 10, the prime minister said. Banks will remain closed on November 9.
How you can exchange your notes
The Rs 500 and Rs 1,000 notes can be submitted to post offices and banks from November 10 till December 30 with an valid ID card such as a passport, PAN card or Aadhaar card. Those who are unable to exchange their notes by December 30 will be allowed to declare them with the Reserve Bank of India till March 31. There will be a cap of Rs 20,000 on the amount of money that can be exchanged in a week and Rs 10,000 in a day. Tourists can change these notes at airports.
A number of exceptions have been made at places of particular importance, where the Rs 500 and Rs 1,000 notes will be accepted for an additional 72 hours, that is till midnight on November 11. This includes hospitals, railway ticket booking counters, government bus stands, and airports.
New notes of Rs 2,000 and Rs 500 will be circulated, Modi said, though these will have limited circulation. They will be introduced on November 10.
In the past:
Indian governments have demonetised currency notes in the past as well. According to the RBI, Rs 1,000 and Rs 10,000 banknotes were demonetised in January 1946. Banknotes for Rs 1,000, Rs 5,000 and Rs 10,000 were reintroduced in 1954. Rs 1,000, Rs 5,000 and Rs 10,000 were demonetised again in January 1978.