RBI Revisits Plan for Polymer Banknotes as Currency Printing Costs Rise

The Reserve Bank of India is once again looking at the possibility of bringing polymer banknotes into circulation, a proposal that was first taken up more than a decade ago. The idea has come back on the table because the cost of printing paper currency has risen sharply and the volume of damaged notes being pulled out every year is now in the tens of billions.

A pilot project is expected to be announced shortly. The first denominations likely to be tested are the lower-value 10 rupee and 20 rupee notes, since these change hands most often and wear out the fastest. The matter was discussed at the central bank's two most recent board meetings.

A polymer banknote is a currency note printed on a thin, flexible plastic film instead of the cotton-based paper used in traditional notes. The label plastic can be misleading. These notes are not stiff like a credit card. They are thin, foldable and can be handled in the same manner as paper notes. Their biggest advantage is durability. Polymer notes resist dirt, water and tearing better than paper, so they stay in circulation longer before they have to be replaced.

These notes can also carry advanced security features such as see-through windows, micro-optic holograms and special inks, which makes them much harder to counterfeit. Because they last longer, the overall cost of producing and replacing notes over time tends to fall, which is a major part of the economic argument for the switch.

The financial pressure is clear. The expenditure on printing currency notes climbed to about 6,372.8 crore rupees in the financial year ending March 2025, against 5,101.4 crore rupees the year before. In the same period, the central bank withdrew approximately 23.8 billion soiled notes from circulation, a 12.3 per cent jump over the previous year, with 500 rupee notes accounting for the largest share. Currency in circulation hit a record 42.86 trillion rupees as of 15 May 2026, an 11.5 per cent increase over the past year.

India had attempted this once before. In 2012, a field trial of around one billion polymer 10 rupee notes was approved across Kochi, Mysore, Jaipur, Bhubaneswar and Shimla, chosen for their varied climate. That experiment was eventually shelved due to handling issues and difficulties faced by ATMs in recognising and dispensing these notes. Sources familiar with the current discussions say that technology has since improved enough to overcome those barriers.

Globally, more than 60 countries already use polymer notes either fully or partly. Australia was the first in 1988, followed by Canada, the United Kingdom, Singapore, Malaysia, Thailand, Indonesia, Romania, New Zealand and Vietnam. The US continues to use a cotton-linen blend instead. A full replacement of paper notes in India is not on the cards. The plan, for now, is a focused pilot to test durability gains and operational readiness.