RBI revives plastic currency plan, eyes polymer banknotes pilot amid rising cash demand: Report – Firstpost

The Reserve Bank of India (RBI) is revisiting its plan to introduce polymer banknotes and is expected to launch a pilot programme soon, amid rising demand for currency and higher printing costs, Business Standard reported on Friday.

According to the report, the issue of introducing polymer or plastic currency was discussed in the central bank’s recent board meetings held in Patna and Mumbai. The move comes as currency in circulation continues to surge even alongside rapid digital payment adoption.

The proposal is being revisited due to the cost advantages and significantly higher durability of polymer notes compared to traditional cotton-based paper currency, the report said.

The RBI’s expenditure on printing currency rose sharply to Rs 6,372.8 crore in 2024-25 (FY25), compared to Rs 5,101.4 crore in the previous year, driven by higher demand for banknotes, according to its annual report.

What are polymer banknotes?

Polymer banknotes are made using bi-axially oriented polypropylene (BOPP) films, which allow for advanced security features such as metameric inks and enhanced anti-counterfeiting elements. They are also more resistant to moisture, folding and microbial damage.

Globally, polymer currency was first introduced by Australia in 1988, which fully transitioned to polymer notes by 1996. Today, several countries including Canada, the United Kingdom, New Zealand, Vietnam, Romania, Brunei, Nicaragua, Papua New Guinea, Maldives and Mauritania use polymer banknotes.

Canada began transitioning to polymer currency in 2011 after environmental assessments concluded that polymer performed better than paper across multiple lifecycle stages.

Environmental and durability edge

Compared to traditional cotton-based paper notes, polymer currency is considered more durable and environmentally efficient over its lifecycle. Cotton, the primary raw material used in paper banknotes, requires significant use of water, pesticides and chemicals, contributing to environmental degradation.

In India, banknote paper is cotton-based and coated with a thin layer of lacquer to improve resistance to moisture and dirt. While widely used globally, such notes typically have a shorter lifespan compared to polymer alternatives.

According to global assessments, polymer notes can last 2.5 to 4 times longer than cotton-based currency and are less prone to wear and tear. However, they are also nearly twice as expensive to produce.

India’s earlier attempts

This is not the first time the RBI has explored polymer currency. In October 2009, the central bank floated an expression of interest (EoI) to global manufacturers for 1 billion pieces of Rs 10 polymer notes.

Subsequently, RBI annual reports for 2009-10 and 2010-11 had outlined plans for limited field trials. In 2015-16, the central bank proposed issuing Rs 10 polymer notes in five cities across different climatic zones — Mysuru, Shimla, Jaipur, Kochi and Bhubaneswar — but the project was eventually shelved due to operational and technological constraints.

However, officials now believe the ecosystem has evolved, particularly in terms of ATM compatibility and note authentication systems, making a pilot rollout feasible.

If implemented, India would join a growing list of countries shifting toward more durable, secure and long-life currency systems as central banks look to balance cost efficiency, sustainability and cash demand in an increasingly digital economy.

Rising cash demand, durability concerns drive rethink

The central bank’s renewed interest in polymer notes comes at a time when currency in circulation (CiC) has climbed to record levels. CiC stood at Rs 42.86 trillion as of mid-May, marking an 11.5 per cent year-on-year increase.

Soiled notes are also becoming a growing operational burden. As many as 23.8 billion pieces of banknotes were withdrawn from circulation in FY25, up 12.3 per cent from 21.24 billion in the previous year, with Rs 500 notes accounting for the largest share.

According to the report, demand for lower denomination notes such as Rs 10 and Rs 20 remains structurally high, even though their share in overall circulation remains limited.