‘Clear advantages’: RBI mulls printing plastic notes; here’s why

The Reserve Bank of India (RBI) has reportedly revived a proposal to introduce polymer banknotes for circulation. This move comes as demand for currency notes has increased in recent years. 

According to a report in Business Standard, the idea of polymer, or plastic, notes was discussed at the RBI’s last two board meetings held in Patna and Mumbai. A pilot project for public use is expected to be announced soon.

The decision is driven by the advantages of lower production costs and longer shelf life of polymer notes, the report said. The cost of printing paper currency has risen, and a large volume of soiled notes continues to be disposed of. Despite the growth in digital payments, currency in circulation has also increased, it said.

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A source familiar with the board’s discussions told the financial daily that polymer notes are cheaper to produce compared to paper notes. The source added that automated teller machines (ATMs) would be enabled to dispense polymer notes. 

According to the RBI’s FY25 annual report, expenditure on printing paper currency rose to ₹6,372.8 crore in 2024-25 from ₹5,101.4 crore the previous year. This increase was mainly due to a higher indent for printing banknotes.

Increasing the shelf life of banknotes was a key reason for revisiting polymer notes, the report stated. A high number of soiled banknotes are also getting disposed of, with 23.8 billion pieces disposed of in FY25, up 12.3 per cent from 21.24 billion pieces the previous year. Most soiled notes were of the ₹500 denomination, followed by ₹100 notes, it said.

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Currency in circulation rose sharply by 11.5 per cent year-on-year to a record ₹42.86 lakh crore as on May 15. In absolute terms, currency in circulation increased by ₹1.15 lakh crore during the first one-and-a-half months of FY27, showing sustained demand for cash despite digital payment growth.

Demand for lower denomination banknotes such as ₹10 and ₹20 has been noted in recent years, but their share in total banknotes in circulation remains low. The ₹10 denomination accounted for 0.7 per cent and the ₹20 banknote for 0.8 per cent in value terms over the last two years.

The RBI has tried to promote the use of coins, but this has not met expectations. Coin supply increased from about 1.2 billion in FY24 to 1.5 billion in FY25. The ₹5 coin accounted for 800 million, followed by 400 million ₹20 coins