What are plastic banknotes and why is RBI considering them now?
May 29, 2026
The RBI is considering polymer currency notes as printing costs rise and demand for cash continues despite digital payments growth.
The Reserve Bank of India (RBI) is planning to introduce polymer banknotes for circulation to meet the rising demand for currency notes in recent years, despite the rapid growth of digital payments, Business Standard reported on Thursday. The move revives a decade-old proposal to introduce polymer, or plastic, banknotes, with the central bank likely to announce a pilot project soon.
But what exactly are plastic banknotes, how are they different from paper currency, and why is the RBI considering the switch now?
What are plastic banknotes?
Plastic banknotes, officially known as polymer banknotes, are currency notes made from a thin, flexible plastic substrate, called polymer, instead of the cotton-based paper which is used in traditional banknotes.
Despite being called “plastic” notes, they are not rigid like credit or debit cards. Polymer notes are lightweight, flexible and can be folded and handled much like conventional paper currency.
The key difference is durability. Polymer banknotes generally last much longer than paper notes because they are more resistant to dirt, moisture, and tearing. This reduces the number of damaged notes that can no longer be used and need to be replaced.
Additionally, polymer notes can be designed to be incredibly difficult to counterfeit as they can use advanced, built-in security features such as see-through windows, micro-optic holograms, and specialised inks.
Because polymer notes remain in circulation for longer, central banks often spend less on replacing damaged notes over time.
Why is the RBI considering them now?
The RBI’s renewed interest in polymer banknotes comes amid a sharp rise in currency demand in recent years. According to the RBI’s annual report, the expenditure on printing currency notes rose to ₹6,372.8 crore in FY25 from ₹5,101.4 crore in the previous year, largely due to increased demand for banknotes.
At the same time, the volume of soiled notes being withdrawn from circulation has also increased significantly. In FY25 alone, around 23.8 billion pieces of soiled banknotes were disposed of, with ₹500 and ₹100 notes accounting for a large share.
The RBI is also witnessing sustained demand for lower denomination notes such as ₹10 and ₹20, which typically wear out faster because of frequent circulation.
When did India try this before?
In 2012, the Centre approved a field trial of one billion ₹10 polymer banknotes in selected cities with varied geographical and climatic conditions, including Kochi, Mysore, Jaipur, Bhubaneswar, and Shimla.
However, the initiative was eventually shelved because of technological and operational challenges, including issues related to handling and processing the notes.
But those technological limitations have largely been resolved, including the ability of ATMs to identify and dispense polymer-based notes, as reported by Business Standard earlier.
Which countries currently use plastic banknotes?
More than 60 countries globally have introduced polymer banknotes either fully or partially into circulation.
Australia became the first country to issue a polymer banknote in 1988, starting with its $10 note. Since then, several countries have adopted plastic currency, including Canada, the United Kingdom, Singapore, Malaysia, Thailand, Indonesia, Romania, New Zealand, and Vietnam.
Many central banks have cited longer durability, lower replacement costs, and improved security features as the main reasons for switching to polymer notes.
While some countries have fully transitioned to polymer currency, others use a mix of paper and polymer notes depending on the denomination.
Will India replace all paper notes?
While the RBI is planning on introducing polymer notes soon, the replacement of all paper notes will not happen immediately. The central bank expected to begin with a pilot project before considering any large-scale transition to polymer currency.
Lower denomination notes such as ₹10 and ₹20 are likely to be tested first, as these notes circulate more frequently and wear out faster than higher-value denominations.
A wider rollout, if approved, would likely happen gradually and depend on the outcome of the pilot project, operational feasibility and public acceptance.
[The Business Standard]
