The Centre has approved the Reserve Bank of India's proposal to conduct a field trial of Rs 10 and Rs 20 polymer currency notes.
The move marks a significant step in the evolution of India's currency system. According to the proposal, the polymer notes will circulate alongside the existing paper currency rather than replacing it immediately.
More than 60 countries have already adopted polymer banknotes. Nations including Australia, Canada, New Zealand, Vietnam and Romania have fully transitioned to polymer currency.
However, despite their longer lifespan and potential cost savings over time, India has taken more than a decade to move towards introducing polymer notes.
A proposal revived after more than a decade
The RBI first proposed polymer banknotes as a pilot project in 2009. It took nearly three years for the Centre to approve the proposal in 2012.
Under the pilot programme, the RBI and the Centre authorised the circulation of one billion Rs 10 polymer notes on a trial basis.
To assess their durability under different climatic conditions, the notes were tested in Kochi, Mysuru, Jaipur, Shimla and Bhubaneswar.
The RBI's findings revealed that the polymer notes generated significant friction and static electricity while being processed through high-speed currency handling machines.
As a result, the notes tended to stick together, leading to higher error rates in banking operations.
Environmental concerns examined
The project also faced scrutiny over its environmental impact, prompting the government to commission an environmental assessment in 2013.
The study, conducted by The Energy and Resources Institute (TERI), concluded that polymer currency offers long-term environmental benefits.
According to the report, although polymer notes have a higher initial carbon footprint during production, their significantly longer lifespan reduces the frequency of replacement, lowering the overall need for printing new currency.
Because they are more resistant to wear and tear, polymer notes become both more environmentally sustainable and cost-effective over time.
Earlier challenges delayed the rollout
One of the major hurdles was India's dependence on imported raw materials used to manufacture polymer notes, sourced from countries such as China, Malaysia and Indonesia. Pricing issues and bureaucratic delays further slowed the process.
Commercial banks also expressed concerns over the investment required to upgrade their infrastructure to handle polymer currency.
The momentum was further disrupted by the 2016 demonetisation exercise. According to RBI data, currency printing costs rose to a record Rs 7,965 crore during FY2016-17.
Following demonetisation, the RBI's printing subsidiary, Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), suspended several experimental projects, including polymer currency trials.
At the time, introducing an untested currency format was considered an unnecessary risk amid the large-scale logistical challenges of replacing banknotes nationwide.
Global success of polymer banknotes
Australia became the world's first country to introduce polymer banknotes in 1988. It was later followed by countries including Singapore, Indonesia, Canada and the United Kingdom.
Most nations use Biaxially Oriented Polypropylene (BOPP) as the base material for polymer notes. Unlike conventional cotton-based paper, BOPP is non-porous, making it highly resistant to moisture, sweat, oils and liquid spills.
Polymer banknotes also allow the incorporation of advanced design and security features. For example, UK polymer notes include raised tactile dots to help visually impaired users identify denominations.
They also feature sophisticated security elements such as transparent windows, colour-shifting ink and micro-optic holograms.
Some transparent security windows can reveal hidden images or numerical values when viewed under specific light sources, making counterfeiting significantly more difficult.
What has changed now?
Experts believe the latest approval reflects lessons learned from international experience.
Instead of printing security features on finished sheets, newer polymer notes are expected to integrate holograms, transparent windows and other security elements directly into the polymer substrate during manufacturing.
This approach enhances anti-counterfeiting protection by embedding security features within the note itself.
Studies also suggest that anti-static surface texturing could be incorporated to minimise the sticking and jamming issues encountered during earlier trials, improving compatibility with ATMs and high-speed cash processing machines.
Experts say polymer notes could also help reduce paper waste associated with conventional cotton-based currency while supporting India's broader environmental goals.
Although the RBI has yet to announce a formal launch timeline, the successful adoption of polymer currency in several countries has renewed India's interest in introducing the more durable banknotes.
