India scraps its two largest notes in shocking anti-corruption move
India has discontinued its two largest rupee notes in a shocking move against corruption.
Notes worth 500 and 1,000 rupees will be invalid starting at midnight local time, Prime Minister Narendra Modi announced during a televised address to the nation.
The unexpected move is designed to fight against corruption and money laundering, Modi said, calling them “diseases” and “obstacles” to the country’s economic success.
The ban will likely spark a mad scramble as ordinary Indians seek to exchange or deposit their cash. Modi said citizens have 50 days to deposit at banks and post offices. Hospitals will be allowed to accept the banned notes for another three days, until Nov. 11.
The move could also complicate business transactions in the short term. The largest legal bill in circulation starting Wednesday will be the 100 rupee note, which is worth only $1.50.
India is believed to have lost out on over $100 billion in uncollected tax, a large percentage of which is illegally stashed offshore.
Only 2% of Indians pay any income tax at all because most people work in the economy’s informal sector that includes jobs such as construction laborers and road side food sellers.
Modi said the Reserve Bank of India will work to issue new 500 and 2,000 rupee notes, but it was not immediately clear when new currency would be ready for distribution.
Modi also touted the move as an anti-terrorism measure, saying that “enemies across the border have run their operations using fake currency notes,” a reference to neighboring Pakistan.