Centre clears RBI plan to test ₹10 and ₹20 plastic currency notes

The government on Monday said it has approved the Reserve Bank of India's proposal to introduce one billion pieces each of ₹10 and ₹20 polymer banknotes for field trials.

In a written reply to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said the RBI had sought the Centre's approval under the Reserve Bank of India Act for field trials of polymer banknotes in ₹10 and ₹20 denominations.

The proposal also envisages regular issuance of polymer banknotes in these denominations after successful completion of the field trials, he said.

The minister said the RBI has informed the government that international studies show polymer banknotes have a significantly longer lifespan than paper notes.

However, he said the proposal is still at a preliminary stage and its impact, if any, on digital payments can be assessed only after regular issuance of the notes.

He pointed out that banknotes and digital payment systems are complementary modes of payment available to the public.

The government also ruled out any move to phase out paper currency.

"As per RBI, polymer banknotes are proposed to be issued along with paper substrate-based banknotes and there is no proposal to replace paper currency with polymer substrate-based banknotes," Chaudhary said.

He had said the proposal was under consideration and the RBI was evaluating its costs and benefits before taking a final call, adding that the exercise remained at a preliminary stage.

The move is being considered even as cash demand continues to rise despite the rapid expansion of digital payments.

An earlier attempt to introduce polymer currency did not move forward.

In 2012, the government had approved field trials of one billion ₹10 polymer notes in select cities to improve the durability of banknotes, but the initiative did not progress due to technological challenges.

Several countries, including Australia, Canada, Singapore and Malaysia, already use polymer banknotes.