RBI targets rollout of plastic banknotes at start of FY28

The Reserve Bank of India plans to introduce long-lasting polymer banknotes into circulation at the beginning of the next financial year, Governor Sanjay Malhotra said on Wednesday.

"We are targeting that they are in circulation, if everything goes as per plan, in the beginning of the next financial year," Malhotra told reporters after the central bank's monetary policy announcement.

The RBI is looking to introduce polymer notes because they last much longer than conventional paper currency, making them particularly suitable for lower-denomination notes that change hands frequently.

Malhotra said polymer notes have remained in circulation for more than 30 years in some countries and would be especially useful for denominations with high transaction volumes.

In a written reply to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said the RBI had sought the government's approval under the Reserve Bank of India Act for the field trials.

The proposal also envisages regular issuance of polymer banknotes in the two denominations if the trials are successful.

According to the government, international studies cited by the RBI 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.

The government has also clarified that there is no proposal to phase out paper currency.

The RBI had said last month that it was examining the feasibility of introducing polymer banknotes and evaluating their costs and benefits before taking a final decision.

India's renewed push comes even as digital payments continue to expand rapidly, while demand for cash has also remained strong.

An earlier attempt to introduce polymer currency failed to take off.

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

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