India abolishes 500 and 1,000 rupee bills to fight corruption, terrorism

NEW DELHI, Nov. 8 (UPI) -- India pulled all of the country's 500 and 1,000 rupee notes out of circulation in a bid to crack down on black market and counterfeit currency, sending worried residents rushing to banks to withdraw cash for the coming days.

Indian Prime Minister Narendra Modi, in an unscheduled announcement to the country late Tuesday, said eliminating the legal tender will aid the country in its fight against corruption and terrorism. India, primarily a cash economy, is using the move to fight back against militants who are suspected of using phony high-value rupees to fund operations.

Modi, during his speech, said the currency "will become just worthless pieces of paper," adding that other forms of currency will not be affected.

"The magnitude of cash in circulation is directly linked to the level of corruption. Inflation becomes worse through the deployment of cash earned in corrupt ways. The poor have to bear the brunt of this. It has a direct effect on the purchasing power of the poor and the middle class," he said.

Officials announced banks would be closed on Wednesday and ATM machines not working in expectation of a surge of deposits in the coming days. Local residents rushed to banks to withdraw money.

The currency will be accepted in select places for the next three days, including government hospitals and gas stations. Residents have 50 days to deposit old bills into banks or post office accounts.