Plastic Currency in India

Syllabus: GS3/Economy

Context

• Recently, Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL) invited Expressions of Interest (EoI) for supplying polymer substrate sheets with embedded security features.

What are Polymer Banknotes?

• These are made from biaxially orientated polypropylene (BOPP), not paper based on cotton.
• Australia became the first country to introduce polymer currency in 1988, and today over 60 countries, including the UK, Canada, Australia, New Zealand, Singapore, Malaysia and Vietnam, use polymer notes either fully or partially.
• The Reserve Bank of India (RBI) has revived its long-pending proposal to introduce polymer (plastic) banknotes, nearly 15 years after the first pilot project was announced.

Why is RBI Reviving the Proposal?

• Longer lifespan: Polymer notes last on average 2.5-4 times longer than cotton-paper notes.
  • India replaces 20-24 billion soiled notes under the Clean Note Policy every year & RBI spends about ₹5,000 crore a year on printing and managing currency.
• Enhanced Security: Polymer notes incorporate improved anti-counterfeiting technologies such as transparent windows, micro-printing, sophisticated holographic elements and embedded security features.
  • The RBI data indicated that the number of counterfeit notes detected climbed to around 2.3 lakh pieces in 2025-26.
• Lower Lifecycle Costs: Higher cost of manufacture is offset by fewer replacement cycles, meaning less printing, transportation, storage and destruction of soiled notes.

• The earlier Life Cycle Impact Assessment of polymer notes by TERI has shown that the overall environmental footprint of polymer notes can be lower as a lesser number of notes need to be manufactured and transported over time.

Major Concerns

• High Production Cost: Polymer notes are 30-60% more expensive than cotton-paper notes.
  • In some countries manufacturing costs for lower denominations have been in the vicinity of 20-24% of face value of the note, raising questions of cost-effectiveness.
• Petrochemical Dependence: The polymer substrates are made from polypropylene.
  • India still imports a lot of polypropylene and so costs are vulnerable to crude oil prices, geopolitical tensions and supply disruptions in West Asia.
  • Reliance Industries and Indian Oil Corporation are scaling up domestic capacities, but import dependence remains a strategic concern.
• Transition costs: The switch to polymer currency would require recalibration of ATMs, cash sorting machines, vending machines and currency processing equipment.
  • Commercial banks, retailers and cash logistics firms would also face costs of adapting.
• Existing investments in paper currency: India has made substantial investments in domestic currency infrastructure including Bank Note Paper Mill India Pvt. Ltd and indigenous ink manufacturing facilities.
  • Sudden shifts might mean these investments are under-utilised.

Looking Forward

• Deploy in Phases: Don’t replace all denominations, but begin with ₹10 and ₹20 notes where durability benefits are highest.
• Build up domestic manufacturing: Atmanirbhar Bharat: Promote indigenous production of polymer substrates to cut down strategic dependence on imports.
• Full cost-benefit analysis: RBI to weigh lifecycle and transition costs, environmental and security benefits.
• Build recycling infrastructure: Set up recycling facilities to maximise environmental benefits.
• Continue with digital expansion: Polymer notes are meant to supplement, not replace, India’s digital payments strategy, ensuring financial inclusion where cash is still king.

Source: TH