India to Introduce Polymer Notes: RBI Tender, Benefits, and Significance
UPSC / SSC current affairs note · Economy
Why in news
India has taken the first step towards introducing plastic or polymer currency notes, with the RBI floating a tender for polymer substrate sheets. The move revives a project shelved decades ago and aims to address durability, counterfeiting, and cost issues. The RBI has been permitted to print 2 billion polymer notes (Rs 10 and Rs 20) for field trials.
Background
The idea of polymer notes was considered in India decades ago but was shelved. The current initiative is in a preliminary phase, with no plan to replace paper currency, which will continue as legal tender. India has discarded around Rs 50 trillion worth of soiled notes in the last decade, and spends about Rs 5,000 crore annually on security features.
Key facts
RBI has floated a tender for polymer substrate sheets with embedded security features, via its currency printing arm Bharatiya Reserve Bank Note Mudran Pvt Ltd (BRBNMPL).
The RBI has been permitted to print 2 billion polymer notes: one billion each of Rs 10 and Rs 20 notes, for field trials.
Polymer notes have a significantly higher lifespan than paper notes, according to international studies.
India discarded around Rs 50 trillion worth of soiled notes in the last decade.
Since FY17, for every 100 new notes RBI supplies, 71 soiled notes have been withdrawn from circulation.
The number of counterfeit notes is on the rise.
Polymer banknotes address durability, counterfeiting, and costs together.
Suppliers must meet strict security conditions, including government clearance, restrictions on China and Pakistan-linked operations, and prior experience supplying polymer banknote substrates to central banks.
Paper currency will continue to co-exist as legal tender money.
India's paper notes are easily soiled due to humidity and diverse climatic conditions.
Prelims pointers
- RBI: Reserve Bank of India
- BRBNMPL: Bharatiya Reserve Bank Note Mudran Pvt Ltd
- Polymer notes: also known as plastic notes
- Denominations for trial: Rs 10 and Rs 20
- Field trials: 2 billion notes (1 billion each)
- Legal tender: paper currency continues
- Soiled notes: notes withdrawn from circulation due to wear and tear
- Counterfeit: fake currency
- Lok Sabha: lower house of Indian Parliament
- Minister of State for Finance: Pankaj Chaudhary
Mains angles
- Discuss the economic and environmental implications of introducing polymer banknotes in India.
- Critically examine the challenges and benefits of transitioning from paper to polymer currency in a diverse economy like India.
- Analyze the role of the RBI in currency management and the significance of technological upgrades in currency printing.