Could India switch to polymer banknotes? RBI says proposal under preliminary consideration

 The Reserve Bank of India is examining a proposal to introduce polymer currency notes in the country, Governor Sanjay Malhotra said on Friday. Speaking after the Monetary Policy Committee meeting, he stated that the proposal remains at a preliminary stage and that no final decision has been taken. According to the governor, the central bank is currently evaluating the advantages and disadvantages of polymer-based currency.

Polymer banknotes are made from a plastic substrate rather than the cotton-based paper currently used for Indian currency. The technology was first developed in Australia and has since been adopted by countries including the United Kingdom, Canada, New Zealand and Singapore. Compared with conventional paper notes, polymer notes are designed to withstand moisture, dirt and repeated handling for longer periods.

One of the key reasons behind the RBI’s examination of polymer notes is the issue of currency deterioration. Large numbers of damaged notes are withdrawn from circulation every year due to wear and tear. High-denomination notes, including ₹100 and ₹500 notes, account for a significant portion of the currency removed and replaced. Studies conducted in several countries have indicated that polymer notes can remain in circulation substantially longer than paper notes.

The RBI is also examining the security features associated with polymer currency. Polymer notes can incorporate transparent windows, holograms, colour-shifting elements and other security features intended to make counterfeiting more difficult. Concerns regarding counterfeit high-denomination notes have remained an area of focus for currency management and security authorities.

The proposal is not new. The RBI first explored the possibility of introducing polymer notes in 2007 and later announced pilot plans involving ₹10 polymer notes in selected cities, including Jaipur, Shimla, Bhubaneswar, Mysuru and Kochi. Subsequent feasibility studies and procurement-related processes were undertaken, but the proposal did not progress to nationwide implementation.

In recent years, the central bank has also experimented with varnished notes, which are conventional paper notes coated with a protective polymer layer to improve durability. The discussion on polymer notes came alongside the Monetary Policy Committee’s decision to keep the repo rate unchanged at 5.25 percent and maintain its neutral policy stance amid global uncertainties, geopolitical developments and inflation-related considerations.