India’s First Plastic Notes Likely To Enter Circulation Next Financial Year: RBI Governor

India's first polymer or plastic banknotes are expected to enter circulation at the beginning of the next financial year, Reserve Bank of India (RBI) Governor Sanjay Malhotra has said, as the central bank continues a pilot project to test their performance under Indian conditions.

The RBI is initially testing polymer notes in the ₹10 and ₹20 denominations. Malhotra said any decision to expand the programme would depend on the results of the field trials.

Polymer Notes To Be Tested In ₹10 And ₹20 Denominations

The government has authorised the RBI to print up to 2 billion polymer banknotes for field trials — 1 billion each in the ₹10 and ₹20 denominations.

“If everything goes as per plan, we are targeting that they (polymer notes) be in circulation at the beginning of the next financial year,” Malhotra said at a post-monetary policy press conference.

He stressed that the project remains at the pilot stage and that the RBI would assess how the notes perform before deciding whether to expand their use.

There is currently no proposal to replace paper currency entirely. Polymer and paper banknotes will continue to circulate as legal tender.

Why RBI Is Testing Plastic Currency

According to Malhotra, the move has two main objectives — improving the durability of banknotes and expanding the currency system's capacity as the economy grows.

Lower denomination notes tend to have a shorter lifespan because they change hands more frequently. Polymer notes, he said, have been used in several countries for more than 30 years and can last two to four times longer than notes made from paper substrate.

The RBI will assess how polymer notes perform in India's climate, currency infrastructure and other operating conditions before deciding whether the project should be scaled up or modified.

RBI Invites Global Suppliers For Polymer Substrate

As part of the project, the RBI has issued a global tender through its currency-printing subsidiary, Bharatiya Reserve Bank Note Mudran Pvt Ltd (BRBNMPL), seeking suppliers for polymer substrate sheets embedded with advanced security features.

The move comes amid concerns over the durability of India's paper currency. Nearly ₹50 trillion worth of soiled banknotes has reportedly been withdrawn from circulation over the past decade, while annual expenditure on currency security features is estimated at around ₹5,000 crore.

Reports also indicate that since FY17, the RBI has withdrawn 71 soiled notes for every 100 fresh notes issued.

Suppliers Face Strict Security Requirements

Prospective suppliers for the polymer substrate will have to meet stringent eligibility conditions.

These include government security clearance, compliance with restrictions concerning China- and Pakistan-linked operations and raw materials, and prior experience in supplying polymer banknote substrates to central banks.

Minister of State for Finance Pankaj Chaudhary has said the introduction of polymer banknotes remains in a preliminary phase, citing international studies that show a significantly longer lifespan compared with paper currency.

Longer Lifespan And Security Benefits

Polymer banknotes are associated with several potential advantages, including enhanced security features, lower counterfeiting risks and reduced lifetime costs.

International experience suggests polymer notes can remain in circulation significantly longer than conventional paper currency. Estimates cited in the material indicate that their lifespan can be around 2.5 times longer.

A UK study found that the average lifespan of the £5 polymer note increased from 1.9 years to 4.8 years, while Canada's experience showed that the average lifespan of banknotes quadrupled after the switch to polymer.

The Bank of England has also reported a significant decline in counterfeiting following the introduction of polymer banknotes.

Pilot Results To Decide Future Rollout

The RBI will now assess the performance of the polymer notes in India's climate and currency-handling infrastructure.

The outcome of the pilot will determine whether India expands the use of plastic banknotes, makes changes to the design or production process, or continues with the existing paper currency system alongside the polymer notes.