A major exercise to recalibrate the country’s 240,000-odd automated teller machines (ATMs) is underway to replace Rs 2,000 notes with Rs 500 notes. While the highest-denomination currency will remain legal tender, it will gradually be pulled out of circulation, sources in the know said.

Of the four cassettes within ATMs, three will now be filled with Rs 500 notes, and the fourth will either hold notes of Rs 100 or Rs 200 denominations. Cassettes holding Rs 2,000 notes have already been replaced in many ATMs, and may well be on their way out within a year. Banks are not ...