Indian government has decided to cancel the legal tender character of the high denomination currency notes of INR500 and INR1000 denominations to tackle the menace of black money.

In a sudden address to the nation, prime minister Narendra Modi urged people not to panic and said all the INR500 and INR1,000 denomination notes can be deposited in banks and post offices from 10 November to 30 December without any limit.

Those unable to exchange their old notes before 30 December 2016 deadline, can do so at specified offices of the Reserve Bank of India (RBI) till 31 March 2017.

He also announced that new bills of INR2000 and INR500 will be introduced.

“This step will strengthen the hands of the common man in the fight against corruption, black money and fake currency,” he added.

To help make the transition, banks will remain closed on 9 November 2016 and ATMs will also not function.

The World Bank in July, 2010 estimated the size of the shadow economy for India at 20.7% of the GDP in 1999 and rising to 23.2% in 2007.

In the last two years, the Government has initiated a number of steps to curb the menace of black money in the economy including setting up of a Special Investigation Team (SIT); enacting a law regarding undisclosed foreign income and assets; amending the Double Taxation Avoidance Agreement between India and Mauritius and India and Cyprus; reaching an understanding with Switzerland for getting information on Bank accounts held by Indians with HSBC; encouraging the use of non-cash and digital payments; amending the Benami Transactions Act; and implementing the Income Declaration Scheme 2016.