Higher denomination currency notes of INR 500 (US$0.75) and INR 1,000 (US$1.5) are suddenly just pieces of paper from today.

Nation reels after demonetisation; Rs 500 & Rs 1,000 banned

Higher denomination currency notes of INR 500 ($0.75) and INR 1,000 ($1.5) are suddenly just pieces of paper from today. They are no longer legal tender.

Nation reels after demonetisation

These drastic moves are aimed at fighting black money and the circulation of fake notes. It will also give a push towards a digital economy that lowers transaction costs and fosters innovation and growth.

Given the possible public backlash of force-feeding cashless transactions down the throats of such a large population, this is a huge move by the Modi government. Currency demonetisation has multiple objectives. Photo: Kamlesh Pednekar

Currency demonetisation is an attack on black money by channeling cash into bank accounts. It aims to change the culture of off-the-book transactions in the country. This is expected to give a boost to tax collections and the country’s revenue. Photo: Dalip Kumar

Currency demonetisation aims to pull the rug from under the feet of those circulating counterfeit notes, which destabilize the economy. Terrorist groups are believed to be behind the flood of fake notes in the system.

Currency demonetisation puts a spanner in the works of corruption by making it hard to hand out cash.

Currency demonetisation gives a push to the move toward a cashless society and digital economy, which is more efficient. It reduces transaction costs in a range of areas from payments to loans. This can contribute toward innovation and growth.

The push to go cashless comes on top of the Unified Payments Interface (UPI) that is being rolled out by the RBI and other government bodies. This facilitates digital money transfer between banks, especially on mobile devices.

New 500 and 2000 notes are displayed at the Reserve Bank of India headquarters in Mumbai Photo: Suryakant Vithoba Niwate

A man puts a notice inside his eatery stall in Mumbai (Reuters)