A government statement announcing the move said this was because it was observed that over-the-counter exchange of old currency notes “has shown a declining trend”. 

”It has further been felt that people may be encouraged and facilitated to deposit their old Rs. 500 and Rs. 1000 notes in their bank accounts. This will encourage people who are still unbanked, to open new bank accounts’‘, the press release by the government further said.

Here are other things govt announced in the press release:

• Rs 500 notes will be allowed till December 15 in places where it is already being accepted. Water and electricity bills can also be paid with the old currency till December 15
• There will be a complete ban on the usage of Rs 1000 notes from today midnight.
• Rs 1000 notes will not be accepted at petrol pumps and government hospitals.
• Purchase from Consumer Cooperative Stores will be limited to Rs. 5000 at a time

• Toll payment at toll plazas may be made through old Rs. 500 notes from 3.12.2016 to 15.12.2016.
• Old Rs 500 notes can also be used to top up pre-paid mobile phones. Payment of School fees up to Rs 2000 per student in Central, State, Municipality & local body schools will be accepted through old Rs 500 notes.
• Foreign citizens will be permitted to exchange foreign currency upto Rs 5,000 per week. Entry to this effect will be made in their passports.