India withdraws all 500 and 1,000 rupee notes from circulation

Prime minister Narendra Modi said that while people could exchange their old notes for new bills at banks or post offices until the end of the year, or deposit them in their accounts, they would no longer be legal tender from midnight on Tuesday.

India's highest-denomination currency notes are being withdrawn immediately from circulation, the country's prime minister said on November 8, 2016. Manish Swarup/AP Photo
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NEW DELHI // Indian prime minister Narendra Modi ordered the withdrawal of 500 (Dh28) and 1,000 rupee notes from circulation on Tuesday in a shock announcement designed to tackle widespread corruption and tax evasion.

In a televised address to the nation, he said that while people could exchange their old notes for new bills at banks or post offices until the end of the year, or deposit them in their accounts, they would no longer be legal tender from midnight.

“To break the grip of corruption and black money, we have decided that the 500 and 1,000 rupee currency notes presently in use will no longer be legal tender from midnight that is 8 November, 2016,” he said.

“This means that these notes will not be acceptable for transaction from midnight onwards.”

After a one-day shutdown of all banks and ATMs, new 500 and 2,000 rupee denomination notes would be issued from Thursday by the Reserve Bank of India (RBI), the country’s central bank.

The 500 and 1,000 notes are the largest bills in use in India which is still a hugely cash intensive economy.

Since coming to power in 2014, Mr Modi has pledged to crack down on so-called black money – vast piles of wealth kept hidden from the tax authorities – with a series of new measures, including 10-year jail terms for evaders.

The latest announcement comes a little over a month after the government raised nearly US$10 billion (Dh36.7bn) through a tax amnesty for Indians to report undeclared income and assets.

Finance secretary Shaktikant Das said the decision was “a very bold and powerful and a very decisive step to fight the menace of black money and the use of fake Indian currency notes”.

He warned those with hidden stashes of cash that banks would be extra vigilant with CCTV cameras to record identities and all banking transactions.

* Agence France-Presse