Indian rupee currency notes
A cashier counts Indian rupee currency notes inside a bank in Mumbai. Reuters

India's central bank said it will withdraw all bank notes printed before 2005, as the country looks to rein in on its black money and fake currency market that is estimated at 50% of its gross domestic product (GDP).

The Reserve Bank of India (RBI) said it will withdraw the banknotes starting from 31 March.

"The Reserve Bank of India has today advised that after March 31, 2014, it will completely withdraw from circulation all banknotes issued prior to 2005," the central bank said in a statement.

"From April 1, 2014, the public will be required to approach banks for exchanging these notes."

All the banks in the country will provide exchange facility for these notes until further communication from the RBI. The banks are required to exchange the notes for their customers and non-customers.

Nevertheless, non-customers will have to furnish proof of identity and residence to exchange more than 10 pieces of 500 and 1,000 notes, which are the highest denominations in the country.

The RBI added that the public can easily identify the notes to be withdrawn, as those printed before 2005 do not have the printing year on the reverse side.

The central banks also said that the notes issued before 2005 will continue to be legal tender. It asked the public not to panic and requested the people to actively participate in the withdrawal process.

Black Money and Fake Notes

The RBI did not give any reason for the withdrawal in its official statement. However, the move is expected to unearth black money held in cash

In addition, the country is looking to curb the distribution of fake currencies there. India has added new security features to the notes printed after 2005making them difficult to fake.

The amount held by public is 12tn rupees ($194bn, £118bn, €143bn) as of 27 December 2013, according to RBI data. It is expected that 10-15% of notes in circulation in India are fake notes.

At present, rupee notes are issued in denominations of 5, 10, 20, 50, 100, 500 and 1,000.