NEW DELHI • Indian Prime Minister Narendra Modi yesterday announced that 500-rupee and 1,000-rupee banknotes would be withdrawn from the financial system at midnight, as part of a crackdown on rampant corruption.

The surprise step appears to be designed to bring billions of dollars of unaccounted wealth into the mainstream economy, according to Reuters.

"Black money and corruption are the biggest obstacles in eradicating poverty," Mr Modi said in an address to the nation. New 500-rupee and 2,000-rupee notes would be issued later, he added.

ATM withdrawals would be restricted to 2,000 rupees (S$42) a day until Friday, after which the limit might be increased slowly.

The old notes could be deposited in banks and post offices or exchanged by showing government- issued identification, he said.

Withdrawals from bank accounts will be limited to 10,000 rupees for the next few days. Banks have been ordered to remain shut today.