Banks closed, ATMs shut. Your Rs 500 & Rs 1000 notes are invalid. Good morning, here's the deal

Billions in illicit cash and fake currency turn trash as Centre abolishes Rs 500 and Rs 1,000 notes in a move with massive ramifications.

The 500 and 1,000 rupee notes in your wallet are now only worth the paper they are printed on. Prime Minister Narendra Modi announced on Wednesday that banknotes of these two denominations would be withdrawn from circulation at midnight, saying it was part of a crackdown on rampant corruption and counterfeit currency.

The decision is a big blow to those who earn and stash black money and its implications run far and wide. Firstly, it renders all illicit cash in the form of these notes worthless at the end of December 30, 2016. Secondly, it immediately invalidates all fake currency floating within the country. But more importantly, it forces black money hoarders to find new and innovative way to stash the ill-gotten wealth.

"Black money and corruption are the biggest obstacles in eradicating poverty," the PM said in an address to the nation after a Cabinet meeting.

CRUCIAL MOVE AHEAD OF ELECTIONS

The step is an attempt by Modi to fulfill his election promise of curbing tax evasion and recovering black money. Analysts say the timing of the move is crucial as it comes just before key state elections where parties pump in crores of rupees, often from dubious sources.

The PM also linked the decision to the fight against terrorism, saying enemies from across the border run their operations using fake currency notes. Honest citizens want this battle against corruption, black money, benami property, terrorism and counterfeiting to continue, he said.

Modi said terrorism is a frightening threat. "So many have lost their lives because of it. But have you ever thought about how these terrorists get their money? Enemies from across the border run their operations using fake currency notes. This has been going on for years. Many times, those using fake five hundred and thousand rupee notes have been caught and many such notes have been seized."

Currently Rs 17,54,000 crore worth of notes are in circulation, according to the RBI's database. Rs 500 notes comprise almost 45 percent of this, while 39 percent of the notes were of the Rs 1,000 denomination, in value terms. In volume, Rs 10 and Rs 100 notes constituted 53 percent of the notes in circulation. Only those who have earned their money through legal means will have the courage to deposit it back into their bank accounts by the December 30, 2016 deadline.

Source:indiatoday