Rs 500 and Rs 1000 discontinued: All you need to know about PM Modi's 'surgical strike' against black money

High denomination notes of Rs 500 and Rs 1000 will no longer be legal tender from Tuesday midnight, Prime Minister Narendra Modi announced as he declared a “decisive” war against black money and corruption while disclosing a raft of steps to assure commoners that their money is safe.

In his first televised address to the nation two-and-a-half-years after assuming office, he announced a 50-day window from November 10 to December 30 for those having these notes to deposit them in their bank and post office accounts “without any limit”.

He also said that new notes of Rs 2000 and Rs 500, with completely new design, will be introduced. Officials said such notes have already been reached to banks to prepare for their circulation from November 10.

“Based on past experience, the RBI will hereafter make arrangements to limit the share of high denomination notes in the total currency in circulation,” Modi said.

Watch video | PM Modi's 'surgical strikes' against black money, Rs 500 & Rs 1000 notes won't be legal tender from midnight tonight | Top Quotes

Banks will remain closed on Wednesday and ATMs will also not function tomorrow and in some places on November 10 also. In the first few days, there will be a withdrawal limit of Rs 2000 per day per ATM card. This will be raised to Rs 4000 later.

Similarly, keeping in mind the supply of new notes, in the first few days, there will be a limit of Rs 10,000 per day and Rs 20,000 per week. This limit will be increased in the coming days.

Rs 500 and Rs 1000 notes can also be exchanged for lower denomination currency at bank counters and select post offices till November 24 with a cap of Rs 4000 per day. From November 25, the cap will be raised.

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Banks will open additional counters and work for additional hours to deal with the rush of people wanting to deposit or change notes.

There may be some who, for some reason, are not able to deposit their old Rs 500 or Rs 1000 notes by December 30, 2016, he said, adding they can go to specified offices of the RBI up to March 31, 2017 and deposit the notes after submitting a declaration form.

Officials said there were 6.7 billion pieces of Rs 1000 notes in circulation and 16.5 billion pieces of Rs 500.

In his address, first in Hindi and later in English, Modi, whose government had implemented two schemes for unearthing of black money both domestic and abroad, said Rs 1.25 lakh crore belonging to the “corrupt” people has already been brought out in the open.

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“There comes a time in the history of a country’s development when a need is felt for a strong and decisive step,” he said, asking political parties, all governments, social organisations and media to participate in the war against black money “with enthusiasm to make it a success”.

He conceded that there could some inconvenience to people in implementing the measures and asked them to bear with it.

The notes of Rs 500 and Rs 1000 “will not be legal tender from midnight tonight” and these will be “just worthless piece of paper,” Modi said.

However, he said that all notes in lower denomination of Rs 100, Rs 50, Rs 20, Rs 10, Rs 5, Rs 2 and Re 1 and all coins will continue to be valid. 

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“To break the grip of corruption and black money, we have decided that the Rs 500 and Rs 1000 currency notes presently in use will no longer be legal tender from midnight tonight, that is 8th November 2016. This means that these notes will not be acceptable for transactions from midnight onwards.

“The Rs 500 and Rs 1000 notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper,” the Prime Minister said.

“The rights and the interests of honest, hard-working people will be fully protected. Let me assure you that notes of Rs 100, 50, 20, 10, 5, 2 and one rupee and all coins will remain legal tender and will not be affected,” he added.

Noting that there will be 50 days to deposit the demonetised notes, Modi said, “there is no need for panic.  Your money will remain yours. You need have no worry on this point. After depositing your money in your account, you can draw it when you need it.”

Elaborating on the need for the measures, Modi said in the past decades, the spectre of corruption and black money has grown and has weakened the effort to remove poverty.

“On the one hand, we are now No. 1 in the rate of economic growth. But on the other hand, we were ranked close to 100 in the global corruption perceptions ranking two years back. In spite of many steps taken, we have only been able to reach a ranking of 76 now. Of course, there is improvement.  This shows the extent to which corruption and black money have spread their tentacles,” he said.

He said the evil of corruption has been spread by certain sections of society for their selfish interest. “They have ignored the poor and cornered benefits. Some people have misused their office for personal gain. On the other hand, honest people have fought against this evil,” he said.

Modi also linked black money to terrorism, saying, “enemies from across the border run their operations using fake currency notes. This has been going on for many years.  Many times, those using fake Rs 500 and Rs 1000 notes have been caught and many such notes have been seized”.

He said honest citizens want this fight against corruption, black money, benami property, terrorism and counterfeiting to continue. “Which honest citizen would not be pained by reports of crores worth of currency notes stashed under the beds of government officers? Or by reports of cash found in gunny bags,” he asked.

“This step will strengthen the hands of the common man in the fight against corruption, black money and fake currency,” he said, adding “to minimise the difficulties of citizens in the coming days, several steps are being taken.” 

The Rs 1000 notes are being withdrawn after being in circulation for 16 years while Rs 500 note was re-introduced in 1987. The higher denomination currency notes were withdrawn, first in 1946 but re-introduced in 1954 and again demonetised in 1978.

“For humanitarian reasons, to reduce hardship to citizens, some special arrangements have been made for the first 72 hours, that is till midnight on 11th November,” the Prime Minister said.

During this period, government hospitals will continue to accept Rs 500 and thousand rupee notes for payment.

“This is for the benefit of those families whose members may be unwell,” Modi said.

Pharmacies in government hospitals will also accept these notes for buying medicines with doctors prescription.

For 72 hours, till midnight on November 11, railway ticket booking counters, ticket counters of government buses and airline ticket counters at airports will accept the old notes for purchase of tickets. This is for the benefit of those who may be travelling at this time.

For 72 hours, Rs 500 and Rs 1000 notes will be accepted also at petrol, diesel and CNG gas stations authorised by public sector oil companies, consumer co-operative stores authorised by state or central government, milk booths authorised by state governments, crematoria and burial grounds.

These outlets will have to keep proper records of stock and collections.

Arrangements will be made at international airports for arriving and departing passengers who have Rs 500 or Rs 1000 notes of not more than Rs 5,000, to exchange them for new notes or other legal tender.

Foreign tourists will be able to exchange foreign currency or old notes of not more than Rs 5000 into legal tender.

“I want to stress that in this entire exercise, there is no restriction of any kind on non-cash payments by cheques, demand drafts, debit or credit cards and electronic fund transfer,” Modi said.