In Surprise Move, India Voids 500 And 1,000 Rupee Bills To Fight Corruption

Enlarge this image toggle caption Manish Swarup/AP Manish Swarup/AP

In a surprise move, Indian Prime Minister Narendra Modi announced that the country is taking all existing 500 and 1,000 rupee notes out of circulation.

He said in a televised speech that voiding the country's highest-denomination bills is aimed at cracking down on the black market and getting counterfeit cash out of the financial system. The black market boosts corruption and is used to fund terrorism, he said.

All details on the announcements made today can be found here. https://t.co/UoiCjCyupV #IndiaFightsCorruption pic.twitter.com/WKpgsdTcjg — Narendra Modi (@narendramodi) November 8, 2016

"There comes a time in the history of a country's development when a need is felt for a strong and decisive step," Modi said. "For years, this country has felt that corruption, black money and terrorism are festering sores, holding us back in the race toward development."

According to the BBC, this "is seen as the boldest move by any Indian government to clamp down on tax evaders." Revenue Secretary Hasmukh Adhia hailed the move, likening it to "a surgical strike on black money," Reuters reported.

Modi told Indians they will have 50 days to deposit the old bills into bank or post office accounts, and the amount that people could withdraw would initially be limited. Within hours of the announcement, the notes were nearly useless for buying anything.

Old notes can still be used for the next three days at a select few places such as government hospitals, railway/bus/airline ticket counters, and gas stations.

toggle caption Manish Swarup/AP

The effect was immediate: "Chaos prevailed across major cities as people lined up outside cash dispensing machines following the announcement," Bloomberg reported. After all, "most transactions in daily life are in cash and 45 percent of those are in notes in denominations of 500 rupees and over," according to the BBC.

Five hundred rupees is worth about $7.55. The old notes will be replaced by new ones, and the reserve bank previewed the new design:

RBI issues ₹2000 note in new series pic.twitter.com/7Ob2j1t6Ab — ReserveBankOfIndia (@RBI) November 8, 2016

"Secrecy was essential for this action," as Modi put it, and even bankers seemed genuinely surprised by the dramatic move. "This is news for us also," one head of a state-run bank told Reuters. "I'm not aware how much stock we have in our chest."

There are plenty of unanswered questions about how this will work. The BBC spells out some of those outstanding issues: