Reserve Bank of India Governor Sanjay Malhotra announced on Friday that the central bank is exploring the possibility of introducing polymer currency notes in India. However, he emphasized that the idea remains in a preliminary stage and no final decision has been made.
Current Status of Polymer Note Proposal
Addressing the media after the Monetary Policy Committee (MPC) meeting, Malhotra stated, "Polymer note is under consideration. We are examining the pros and cons. It is at a preliminary stage." The discussion also covered inflation, interest rates, global uncertainties, and the impact of the Middle East conflict on commodity prices.
What Are Polymer Currency Notes?
Polymer notes are banknotes made from a special plastic substrate, unlike the traditional cotton-pulp paper used for Indian currency. They were first developed in Australia and have since been adopted by countries like the United Kingdom, Canada, New Zealand, and Singapore. These notes are more durable, resistant to moisture and dirt, and can withstand heavy circulation for a much longer period compared to paper notes.
Why Is RBI Considering Polymer Notes?
One of the biggest challenges faced by the RBI is the rapid deterioration of currency notes due to frequent handling and India's varied climatic conditions. According to RBI data, nearly two lakh damaged currency notes are withdrawn and destroyed every year. High-value notes such as Rs 100 and Rs 500 account for a large share of the damaged currency removed from circulation. Global studies have shown that polymer notes can last at least twice as long as paper notes, and in some cases up to five times longer. Because they remain in circulation longer, central banks may also save on printing and replacement costs over time.
Can Polymer Notes Reduce Fake Currency Circulation?
Another major advantage of polymer notes is their enhanced security features. They can incorporate transparent windows, holograms, colour-shifting elements, and other advanced security measures that are much harder to replicate than traditional paper-based currency. Fake currency notes remain a concern for central banks worldwide. RBI data has shown a rise in fake high-denomination notes detected in recent years, particularly Rs 500 notes. Countries that have adopted polymer currency have generally reported lower levels of successful counterfeiting. Australia, which fully switched to polymer notes by the mid-1990s, says its latest generation of notes includes multiple advanced security features that make them extremely difficult to fake.
India's Long History with Polymer Note Proposals
The idea of introducing polymer currency is not new. The RBI first proposed polymer notes in 2007 and later announced plans to conduct pilot projects using Rs 10 polymer notes in cities including Jaipur, Shimla, Bhubaneswar, Mysuru, and Kochi. Over the years, several tenders and feasibility studies were undertaken, but the proposal never moved beyond the planning stage. In 2016, the government informed Parliament that the process of procuring polymer notes had been initiated. However, no nationwide rollout followed. More recently, the RBI has also experimented with 'varnished notes' — conventional paper currency coated with a protective polymer layer to improve durability.
In the same MPC meeting, the RBI unanimously decided to keep the repo rate unchanged at 5.25 per cent and retain its neutral policy stance, citing global uncertainties, geopolitical tensions in the Middle East, and inflation concerns.
