RBI Revives Plan For Plastic Currency Notes, New Pilot Project Likely Soon
Experts believe that lower denominatn notes, which are frequently used and deteriorate quickly likely to be chosen for the initial trial, reports Saurabh Shukla
Published : June 4, 2026 at 10:26 PM IST
New Delhi: The Reserve Bank of India (RBI) is considering introducing polymer or plastic banknotes as it looks to reduce the rising cost of printing currency and address the growing number of damaged notes being withdrawn from circulation each year.
Sources suggest that a new pilot project in this regard is expected to be announced soon. A senior government officer told ETV Bharat that the proposal was discussed during the RBI's recent board meetings.
Experts believe that lower denominatn notes, such as Rs 10 and Rs 20 which are frequently used and deteriorate quickly likely to be chosen for the initial trial.
The renewed interest in polymer notes comes amid a sharp increase in currency printing costs and the growing volume of worn out notes being removed from circulation.
The RBI Income Statement for the year ended March 31 2026 shows a sharp decline in expenditure on printing banknotes. But it was significant higher in last few years. The RBI spent close to Rs 4,875 crore on printing notes in 2025-26 which was down from Rs 6,373 crore in 2024-25.
It shows a reduction of nearly 23.5 percent. However if we take data of over the past five years this expenditure has fluctuated. It stood at Rs 4,985 crore in 2021-22, declined to Rs 4,683 crore in 2022-23 and then rose to Rs 5, 101 crore in 2023-24. This spending increased significantly to Rs 6,373 crore in 2024-25 before falling back in last financial year.
What are polymer notes?
Polymer banknotes are made from a thin plastic material rather than the cotton based paper used for conventional currency. Despite being called plastic notes they are quite flexible and can be folded and handled much like ordinary banknotes. Besides this, the main advantage of polymer notes is their durability.
They are more resistant to dirt, moisture and tearing, which allows them to remain in circulation for longer periods. Also they can be incorporated with advanced security features like transparent windows, specialised ink and anti counterfeiting element, making them more difficult to forge. Many countries have adopted polymer banknotes because they generally last longer and reduce replacement costs over time.
First Field Trails
According to Currency Management chapter of Annual Report of The RBI published on August 22 2013, to increase the circulation life of banknotes, particularly in small denominations the RBI in consultation with Government of India, considered various options, including printing banknotes on plastic substrate.
Accordingly it has decided to introduce one billion pieces of Rs 10 banknotes on plastic substrate for field trials in five cities, viz., Jaipur, Bhubaneswar, Kochi, Shimla and Mysore which have been identified because of their geographic and climatic diversity.
First polymer notes country
Annual report further mentioned that Australia was the first country to introduce polymer notes in 1988. Since then dozens of the countries have introduced polymer banknotes of which several have completely switched from paper to polymer.
Some of the advantages of plastic over paper are its properties of less soilage due to the smoother surface and hence they are more hygienic. They are cost effective because they last longer, they create minimal dust and no fibres during printing and handling and they can contain certain security features that are difficult and expensive to counterfeit, mentioned the report.
In this chapter RBI also explained that the central bank has engaged the services of The Energy and Resources Institute to conduct a study on the carbon footprint of cotton based banknote paper substrate vis-a-vis plastic based substrate and to estimate their overall environmental impact, taking into account their complete lifecycles.
The Life Cycle Impact Assessment results for the two types of notes indicate that replacing cotton-based notes with plastic based notes would have significant environmental benefits. Polymer of plastic banknotes (and the waste from production) can be granulated and recycled into useful plastic products such as compost bins, plumbing fittings and other household and industrial products. The base material of polymer is a non renewable resource, but due to its recyclability it has more than one life.
Ex Governors View
In Governor's Post Policy Press Conference Call with the media on July 31 2012 the then RBI Governor Dr. D. Subbarao said, "On polymer notes, fake notes, my understanding, what I have been told is that the possibility of counterfeiting is lower but you can never predict technology, everything is a race between currency printers and counterfeiters who is one step ahead."
But it has been years since there has been any mention of Polymer notes in the RBI's annual reports. Even in annual report 2025-26 which was released on May 29 2026 has no mention of polymer.
Small notes in circulation
According to the latest RBI Annual Report, the number of Rs 2 and Rs 5 banknotes in circulation has remained largely unchanged over the past three years. At the end of March 2024, there were 4,249 crore of value such notes in circulation. The figure dipped marginally to 4,239 crore at the end of March 2025 and further to 4,232 crore by the end of March 2026.
While circulation of Rs 20 banknotes has also continued to grow steadily. It increased from 26,795 crore at the end of March 2024 to 27,680 crore at the end of March 2025, before rising further to 28,105 crore by the end of March 2026.
However the circulation of Rs 50 notes recorded a sharp increase over the three year period. It rose from 44,892 crore at the end of March 2024 to 49,480 crore banknotes at the end of March 2025. The figure increased further to 54,120 crore by the end of March 2026. This growth highlights the increasing use of Rs 50 notes in routine cash transactions and their continued importance in the currency system. Rs 100, 200 and 500 banknotes also seen the same increase while note Rs 2000 has been in declined since its withdrawn from circulation by the Central Bank.
In value terms, the total banknotes in circulation have risen significantly over the past three years. RBI's recent annual data suggests that the value of banknotes in circulation stood at Rs 34.77 lakh crore at the end of March 2024. This increased to Rs 36.86 lakh crore by the end of March 2025 and further to Rs 41.23 lakh crore at the end of March 2026. This sharp rise is reflecting the growth in currency circulation in the economy both in terms of transaction needs and overall cash demand.
Disposal of soiled banknotes
The disposal of soiled banknotes during 2025-26 was lower than that of the previous year on account of transient interruptions arising from the replacement of Shredding and Briquetting Systems at the Issue Offices of the Reserve Bank. It was 1,70,237 lakh pieces in 2025–26.
According to a senior banking official, the shredding of such notes was interrupted during this period due to machine upgrades. But RBI data shows that the number of disposed soiled banknotes was significantly higher in the previous financial years. The figures stood at 2,12,493 lakh pieces in 2023 24, 2,38,563 lakh pieces in 2024–25.
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