Govt Clears 2 Billion Polymer Notes for Field Trials

Synopsis

Parliament on Tuesday was given information that the government has granted the Reserve Bank of India (RBI) permission to launch one billion polymer banknotes, each worth ₹10 and ₹20, for trial runs in the field. The notes will co-circulate with the paper notes if it succeeds, but it is unknown if and when they will be released and how much they will cost to buy.

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Government has approved the RBI's polymer note plan

The Government has approved introduction of one billion polymer banknotes of ₹10 and ₹20 for field trials; Parliament was told on Tuesday. The Reserve Bank of India (RBI) had recommended the proposal to the government under Section 25 of the RBI Act, 1934, and the government had accepted the proposal, the Finance Minister Nirmala Sitharaman told the Rajya Sabha in a written reply.

It is also proposed that field trials should be successful and the polymer bank notes in the 2 denominations should be issued regularly. The minister said that the government has accepted the proposal and according to the RBI the banknotes of polymer substrate will be issued simultaneously with paper banknotes, while the procurement process has been on the initial stage.

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No Plan to Replace Paper Currency

Along with paper-substrate banknotes, polymer banknotes will be released, the minister explained, but there was no plan to replace paper banknotes with polymer-substrate banknotes.

It is a difference between India's way and some other countries like Australia, which was the first country to use polymer banknotes in 1988, notes notes made using a special plastic polymer substrate which is more resistant to water, dirt, moisture and tearing.

There is an economic sense in Polymer Notes

In May, Business Standard had reported that RBI is mulling over printing polymer banknotes to stop the banknotes from going out of circulation for short period and to cater to the surge in demand in recent years. In June, RBI Governor Sanjay Malhotra had said that an idea to introduce polymer banknotes is in the works, and the central bank is weighing the pros and cons of the same.

The expenditure incurred on securely printing paper currency notes during 2024-25 was ₹6,372.8 crore, compared to ₹5,101.4 crore in the previous financial year, mainly due to an increase in the indent for printing banknotes, per the RBI's annual report for FY25.

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Addressing the media, Chaudhary said that RBI has already informed that, according to international studies, the life span of polymer banknotes is much more than that of paper banknotes.

The government approved a field trial for the polymer notes of Rs 10 and Rs 20, which are expected to be launched shortly.

The Governor's Caution

In response to a media question at the post-Monetary Policy Committee briefing, Malhotra said the testing of polymer banknotes was still under way; "There is still a field test under way to evaluate the outcome of the field test before deciding to take the currency to the market, Malhotra has indicated that the RBI is looking towards printing polymer notes by FY28.

A Long-Gestating Idea

This is not the first time India is printing polymer currency. The RBI's prudence in rolling out a nationwide issuance of plastic ₹10 notes is highlighted by its previous testing of the project in 2014-17 in five selected cities for climatic diversity, which would be Kochi, Mysore, Jaipur, Shimla and Bhubaneswar, but which failed to become a full-fledged and nationwide initiative.