Key Takeaways:
- The RBI is reviving a plan for a polymer banknote pilot project to combat rising costs.
- Currency in circulation hit a record ₹42.86 trillion despite the digital payments boom.
- The durable plastic notes aim to lower printing expenses and reduce soiled paper waste.
The Reserve Bank of India is considering a pilot project to introduce polymer banknotes as rising cash demand, higher printing costs, and increasing disposal of soiled notes push the central bank to revisit a decade-old proposal.
RBI Discusses Polymer Notes at Recent Board Meetings
The Reserve Bank of India has revived discussions on introducing plastic currency notes for public circulation, according to sources familiar with deliberations held during the central bank’s recent board meetings in Patna and Mumbai.
The proposed move comes as currency in circulation continues to grow despite rapid expansion in digital payments across the country. Reserve Bank of India data shows currency in circulation rose 11.5 percent year-on-year to a record ₹42.86 trillion as of May 15.
Officials are evaluating polymer notes because of their longer shelf life and lower replacement costs compared with paper currency. A pilot project involving polymer banknotes is expected to be announced soon.
“There are clear advantages in the cost of production of such notes compared to the paper notes currently being used,” one source familiar with the discussions said. “Automated teller machines would also be enabled to dispense polymer-based notes.”
The Reserve Bank of India spent ₹6,372.8 crore on securely printing paper currency during fiscal year 2024-25, up from ₹5,101.4 crore a year earlier, mainly because of increased demand for banknotes.
Rising Disposal of Soiled Notes Drives Push
The disposal of damaged and soiled notes has emerged as another major concern for the central bank.
RBI data shows 23.8 billion soiled banknotes were destroyed in fiscal year 2024-25, a 12.3 percent increase from the previous year. The highest number of discarded notes belonged to the ₹500 denomination, followed by ₹100 notes.
Sources said demand for lower denomination notes such as ₹10 and ₹20 also remains strong, though their share in the total value of banknotes in circulation stays relatively small.
The central bank has also attempted to increase the use of coins, but adoption has remained limited. Coin supply increased from about 1.2 billion pieces in fiscal year 2023-24 to 1.5 billion in fiscal year 2024-25. Of those, ₹5 coins accounted for about 800 million pieces.
A source aware of the discussions said technological challenges that once prevented wider adoption of polymer notes have largely been resolved.
“Solutions have now been developed to ensure ATMs can identify and process polymer notes effectively,” the source said.
India Revisits a Plan Shelved More Than a Decade Ago
India first explored polymer currency in 2012, when the government approved a field trial involving one billion ₹10 polymer banknotes in five cities.
At the time, the United Progressive Alliance government said the primary objective was to improve durability and extend the lifespan of currency notes rather than curb counterfeiting. The initiative was later shelved because of technological limitations.
Since then, polymer banknotes have gained wider global acceptance. More than 60 countries now use polymer currency in circulation.
Australia became the first country to introduce polymer banknotes in 1988 with a 10-dollar note. Countries including Singapore, Canada, Malaysia, and Romania later adopted similar systems.
Unlike polymer currencies, U.S. dollar notes continue to use a specialized cotton-linen blend material.
The RBI has not announced a timeline for the proposed pilot project or specified which denominations could be introduced first.
