RBI may introduce plastic money:Rising cash in circulation, printing expenses cited as main reasons

The Reserve Bank of India (RBI) is planning to introduce plastic currency notes made of polymer. The central bank wants to meet the massive demand of cash in the economy. Amid rising circulation of cash in the country despite the famed UPI ramp-up, the central bank may take this step, says a report by news daily, ‘Business Standard.’ The RBI discussed this move during its recent board meetings in Patna and Mumbai, according to the business daily. The main reasons behind this shift are lower production costs and the fact that plastic notes last much longer than paper ones. A pilot project to test these notes with the public is expected to be announced soon. Why the shift? High costs and soiled notes Printing paper money has become highly expensive for the central bank. According to Business Standard, the RBI spent ₹6,372.8 crore on printing secure paper notes in the 2024-25 financial year (FY25). This was a big jump from the ₹5,101.4 crore spent the year before, mostly because the RBI had to print a lot more notes. Another big issue is handling old, damaged money. In FY25, the RBI had to destroy 23.8 billion (2,389 crore) spoiled banknotes—a 12.3% increase from the previous year. Most of these damaged notes were ₹500 bills, followed by ₹100 bills. An anonymous source told Business Standard that there are clear advantages in the cost of production of such notes compared to the paper notes currently being used. Moreover, automated teller machines (ATMs) would be enabled to dispense polymer-based notes. India has the wherewithal to do this now. Cash is Still King Even though digital payments are growing fast in India, people are still using a record amount of hard cash. The RBI also noticed that while people really want small notes like ₹10 and ₹20, these notes make up less than 1% of the total value of cash circulating in the economy. The central bank tried to get people to use coins instead, increasing coin supply to 1.5 billion (150 crore) pieces in FY25, but the effort did not succeed as well as hoped. This is not India’s first attempt at plastic money. Back in 2012, the government tried to introduce 1 billion (100 crore) plastic ₹10 notes as a test run across five cities. The goal was to make the notes last longer, not to stop fake money. However, that project was canceled because the technology back then was too difficult to manage. Things are different now. Sources told Business Standard that technology is no longer a barrier, and they have successfully figured out how to make ATMs read and dispense plastic notes correctly. With this move, India will join about 60 countries that already use plastic money. Australia was the first to do it in 1988, followed by countries like Singapore, Thailand, and Canada. Meanwhile, countries like the US still stick to a special cotton-linen paper blend for their dollars.