You can exchange at the border, and sometimes you can use ATM's but don't count on them.
Smaller notes are accepted, so take those. And note that your change will be in local currency, which is at par with the INR
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I can exchange even 500 and 2000 notes at the border right? What are these places where the exchange happens? Are they official places or private ones? And how much do they charge for the exchange?
We have just returned from a trip to Bhutan in June. We were told that 500 and 2000 notes were not accepted but we found that barring government places, most shopkeepers were willing to accept them very readily.