Prime Minister Narendra Modi in a surprise announcement declared that 500 and 1000 rupee banknotes would be withdrawn from the financial system starting midnight, saying it was part of a crackdown on black money.
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In what could be termed as a master move by the Modi government against black money, starting midnight, all existing Rs. 500 and Rs. 1000 denominated notes will cease to be legal tender and cannot be used for any transactions.
Addressing the nation, Prime Minister Narendra Modi said that such notes will have to be deposited at banks and post offices before December 31, 2016. Those unable to deposit Rs. 1000, Rs. 500 notes by December 30 for some reason, can change them till March 31, 2017 by furnishing ID proof at the banks.
The RBI will be issuing new Rs. 500 and Rs. 2000 notes in the coming months. The government expects the security features in these notes to eradicate the problem of fake notes.
While this move is expected to create quite a panic starting tonight, the government has allowed government hospitals, pharmacies at such hospitals to accept Rs. 500 and Rs. 1000 notes for 72 hours from November 8 midnight.
There will be a limit on withdrawal of Rs 10,000 per day and Rs 20,000 per week. This limit is expected to be increased in the coming days.
Arrangements will be made at international airports for passengers who have Rs 500 and Rs 1000 notes upto Rs 5000 to exchange with legal tenders.