The Reserve Bank of India is considering the introduction of polymer banknotes into circulation, reviving a proposal first floated over a decade ago, as the cost of printing paper currency surges and billions of soiled notes continue to be pulled from circulation every year.
The central bank is expected to announce a pilot project in the near future, according to Business Standard, with the matter having been discussed at the RBI’s last two board meetings, held in Patna and Mumbai. Lower denomination notes, particularly the ₹10 and ₹20, are likely to be tested first given how rapidly they wear out in everyday use.
What Are Polymer Banknotes and How Are They Different From Paper Currency?
Polymer banknotes are currency notes printed on a thin, flexible plastic substrate rather than the cotton-based paper used in conventional currency. Despite the “plastic” label, they are not rigid like credit or debit cards. They are lightweight, foldable and can be handled in much the same way as paper notes.
The principal advantage is durability. and tearing more effectively than paper equivalents, meaning they remain in circulation considerably longer before becoming too damaged to use. They can also incorporate advanced security features including see-through windows, micro-optic holograms and specialised inks, making them significantly harder to counterfeit.
Because they last longer, central banks typically spend less replacing damaged notes over time, which forms a central part of the economic case for switching.
Why Is the RBI Considering Plastic Notes Now?
The timing of the RBI’s renewed interest reflects a sharp rise in both currency printing costs and the volume of notes being discarded. The expenditure on printing currency notes rose to ₹6,372.8 crore in the financial year ending March 2025, up from ₹5,101.4 crore the previous year, primarily because of increased demand for banknotes, according to Business Standard.
The disposal of soiled notes has simultaneously risen. In FY25, approximately 23.8 billion pieces of soiled banknotes were withdrawn from circulation, an increase of 12.3 per cent from 21.24 billion pieces in the previous year. The ₹500 denomination accounted for the largest share of soiled notes, followed by ₹100 notes, according to BS report.
Currency in circulation has also reached a record high of ₹42.86 trillion as of 15 May, an 11.5 per cent increase year on year, reflecting sustained demand for physical cash even as digital payments continue to grow. In the first one and a half months of FY27 alone, currency in circulation expanded by ₹1.15 trillion.
India Tried This Before. What Happened?
India is not approaching polymer currency for the first time. In 2012, the then government approved a field trial of across five cities chosen for their varied geographical and climatic conditions: Kochi, Mysore, Jaipur, Bhubaneswar and Shimla.
The primary objective at the time was to extend the shelf life of notes rather than combat counterfeiting. The initiative was shelved, however, due to technological and operational difficulties, including problems with handling the notes and with ATMs being unable to identify and dispense them reliably.
Those limitations have since been resolved, according to sources familiar with the current discussions, with technology now available to ensure ATMs can process polymer-based notes without difficulty.
Which Countries Already Use Plastic Banknotes?
More than 60 countries have introduced polymer banknotes either fully or partially into their monetary systems. Australia was the first, issuing a polymer ten-dollar note in 1988. Other countries that have since adopted plastic currency include Canada, the United Kingdom, Singapore, Malaysia, Thailand, Indonesia, Romania, New Zealand and Vietnam. Romania was the first European country to introduce a polymer note, doing so in 1998, while Canada followed in 2011.
Most central banks that have made the switch cite longer durability, lower replacement costs and improved security as the primary drivers. Some countries have fully converted to polymer currency; others use a combination of paper and polymer notes depending on the denomination. US dollar notes, by contrast, are produced from a specialised cotton-linen blend.
Will India Replace All Paper Notes With Plastic Ones?
A full replacement of paper currency is not imminent. The. Lower denomination notes such as the ₹10 and ₹20 are the most likely candidates for the initial trial, as these circulate most frequently and deteriorate fastest.
Any broader rollout would depend on the outcome of the pilot, operational feasibility and public acceptance. The RBI has made sustained efforts in recent years to encourage the use of coins as an alternative to low-denomination notes, but those efforts have produced limited results. The total number of coins supplied rose from approximately 1.2 billion in FY24 to 1.5 billion in FY25, with the ₹5 denomination accounting for the largest share at 800 million pieces.
The decision to explore polymer currency was taken with the twin objectives of reducing production costs and extending the shelf life of notes in circulation, according to sources familiar with the board’s deliberations.