The Reserve Bank of India (RBI) is taking another hard look at introducing polymer (plastic) banknotes into circulation, a move that comes over a decade after a similar pilot project was quietly put on ice.
Speaking at the post-Monetary Policy Committee (MPC) press conference on Friday, RBI Governor Sanjay Malhotra confirmed that the central bank is actively evaluating a proposal to transition from traditional cotton-pulp paper to plastic substrates.
“The proposal to launch polymer currency notes is under consideration. We are examining the pros and cons and whether it would be worthwhile to implement. It is still at a preliminary stage,” Governor Malhotra said, adding that no final decision on design or denomination has been finalised.
Why is RBI at plastic currency right now?
The renewed interest comes at a time when cash has continued to remain important in the Indian economy despite the rapid rise of digital payments. According to RBI’s annual report for 2025-26, a survey on payment behaviour among households and small retailers showed continued strong preference for cash use.
The value of banknotes in circulation rose 11.9% to Rs 41.23 trillion by the end of March 2026, while the volume of banknotes increased 10.5%. The cost of printing currency remains a key consideration. The expenditure incurred on security printing stood at Rs 4,875.2 crore in 2025-26, compared with Rs 6,372.8 crore in the previous year, according to the RBI annual report.
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The lower cost in FY26 was due to a reduced indent of banknotes, but the larger issue for the central bank is the continuing need to print, replace and manage physical currency across a large cash economy.
Polymer notes can help reduce replacement needs because they generally last longer than cotton-paper notes. Countries that have adopted polymer currency, including Australia, Canada and the UK, have cited durability, cleaner notes in circulation and stronger anti-counterfeiting features as key benefits.
Australia was the first country to issue a full series of polymer banknotes, and its central bank has estimated significant long-term savings from the shift.
Improved security against counter-fitting
Another major advantage of polymer notes is their enhanced security features. Polymer banknotes can incorporate transparent windows, colour-shifting elements and other advanced security measures that are much harder to replicate than traditional paper-based currency.
This can make counterfeiting more difficult, especially when combined with public awareness and machine-readable security checks. RBI data show that counterfeit notes detected in the banking system rose to 2,29,746 pieces in 2025-26 from 2,17,396 pieces in 2024-25.
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The increase was led by the ₹500 denomination. Fake ₹500 notes detected in the banking system rose 20.5% to 1,41,907 pieces in 2025-26 from 1,17,722 pieces in the previous year. Fake ₹20 notes also increased sharply, rising 47.4% year-on-year. In contrast, counterfeit notes detected in the ₹10, ₹50, ₹100, ₹200 and ₹2,000 denominations declined during the year.
Detection data do not capture counterfeit notes seized by police and enforcement agencies, but they show why banknote security remains a live issue for the central bank. RBI has already said that a phased rollout of banknotes with new or upgraded security features is expected to start from the middle of 2026.
What went wrong when India tried it for the first time?
This is not India’s first tryst with plastic. In February 2014, the Union Government informed Parliament that the RBI would introduce 1 billion pieces of ₹10 polymer notes for field trials across five geographically and climatically diverse cities: Kochi, Mysore, Jaipur, Shimla, and Bhubaneswar.
That project ran into severe operational roadblocks. Technical limitations at the time which reportedly included ATM dispensing jams and specialised ink degradation under heat which had prompted the central bank to shelve the project.
Any move to polymer currency would require careful testing across India’s cash ecosystem, including ATMs, cash-sorting machines, bank branches, retail counters and cash logistics networks.
Polymer notes can also behave differently from cotton notes; new notes may feel slippery and can be damaged by extremely high heat. These issues are manageable, but may require preparation by banks, ATM operators and businesses handling large volumes of cash.
While the RBI has not confirmed the decision, reports by ETV Bharat suggest that the central bank would likely issue a new pilot to test the plan out before making a decision.
The key takeaway is that India is not replacing its currency notes immediately. The central bank is only studying whether polymer notes can improve the quality, durability and security of currency in circulation.
For a country where digital payments are growing but cash remains widely used, the question before RBI is whether plastic notes can make physical currency cheaper to manage over the long run.
TOPICSECONOMYRBIRBI Monetary Policy ReviewThis article was first uploaded on June five, twenty twenty-six, at eleven minutes past eight in the night. © IE Online Media Services (P) Ltd