Does a Digital-First India Need a Plastic Currency Push?

The Reserve Bank of India (RBI) has taken its clearest step towards implementation since first proposing the idea in 2009. Earlier this month, Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL), the RBI's currency-printing subsidiary, invited global Expressions of Interest (EoI) from manufacturers to supply polymer substrates embedded with advanced security features for banknote production.

The move signals renewed momentum behind a proposal that had remained dormant for over a decade following demonetisation and technological hurdles.

Why polymer banknotes?

Polymer banknotes are made from biaxially oriented polypropylene, a specialised plastic derived from petroleum and natural gas.

Compared with conventional cotton-paper notes, they are considerably more durable, lasting between 2.5 and four times longer depending on the denomination and usage.

Their longer lifespan makes them more resistant to tearing, moisture, dirt and frequent handling.

Polymer notes also allow the incorporation of sophisticated security features such as transparent windows and embedded elements that are difficult to counterfeit.

The benefits are especially relevant for lower denominations such as ₹10 and ₹20, which undergo the highest circulation and physical wear. While these notes contribute relatively little by value, they account for a disproportionately large share of replacement costs under the RBI's Clean Note Policy.

The cost question remains

Globally, polymer banknotes generally cost 30-60% more to manufacture than cotton-paper notes because they require specialised polypropylene substrates, sophisticated printing processes and enhanced security features.

For very low-value denominations, manufacturing costs alone have, in some countries, amounted to nearly one-fourth of the note's face value, raising concerns over economic viability.

India does not publish denomination-wise printing costs. However, RBI's annual reports show that expenditure on security printing stood at ₹5,101 crore in FY24, increased to ₹6,373 crore in FY25 and moderated to ₹4,875 crore in FY26.

Separately, India is estimated to spend nearly ₹5,000 crore annually to replenish its stock of currency while destroying between 20 and 24 billion soiled banknotes every year, the majority being lower-value notes.

Polymer's longer lifespan could substantially reduce replacement frequency, potentially offsetting higher upfront manufacturing costs over time.

Transition costs extend beyond printing

The shift to polymer currency would require significantly more than changing the substrate used for printing.

ATMs, currency sorting machines, vending machines, cash recyclers and banknote processing equipment across the banking system may require recalibration or upgrades to handle polymer notes efficiently.

Commercial banks, cash logistics companies and retailers would also incur operational costs during the transition phase.

Environmental debate: Plastic versus paper

The environmental implications of polymer banknotes remain contested as critics argue that polymer currency has a higher initial carbon footprint because it is manufactured using petroleum-based raw materials.

Questions also remain around end-of-life disposal, recycling infrastructure and plastic waste management.

India currently imports nearly one-fifth of its polypropylene requirement, exposing polymer currency production to fluctuations in global crude oil and petrochemical prices.

Recent geopolitical tensions in West Asia have highlighted how volatile energy markets can influence input costs.

However, domestic polypropylene capacity is expected to expand significantly over the coming years as companies such as Reliance Industries and Indian Oil Corporation undertake large-scale investments.

Does Polymer Currency Make Sense in a Digital-First India?

Perhaps the biggest question is whether India needs to invest heavily in physical currency infrastructure at a time when digital payments dominate retail transactions.

Unified Payments Interface (UPI) now processes more than 24,000 crore transactions annually and accounts for nearly 85% of India's retail digital payments.

Yet cash usage has not declined as sharply as many expected.

The RBI has described this phenomenon as the "currency demand paradox." Even as digital payments have expanded exponentially, currency in circulation has continued to rise steadily.

Cash in circulation has increased from around ₹16-17 lakh crore a decade ago to more than ₹41 lakh crore in FY26.

The persistence of cash demand reflects the continued importance of the informal economy, uneven digital infrastructure and lower acceptance of electronic payments in several rural and semi-urban regions.

A Proposal With a Long History

India's polymer currency proposal is far from new. The RBI first announced plans in 2009 to issue 100 crore ₹10 polymer banknotes.

Three years later, the Ministry of Finance informed Parliament that a pilot project would be conducted in Kochi, Mysuru, Jaipur, Bhubaneswar and Shimla, chosen to test the notes across diverse climatic conditions.

The objective was to evaluate whether polymer notes could significantly improve durability and reduce replacement costs.

Although Parliament was informed again in 2013 and 2014 that the pilot remained under consideration, the initiative gradually lost momentum amid technological challenges and the massive currency replacement exercise following demonetisation.

What happens next?

The latest EoI issued by BRBNMPL marks the strongest indication that the RBI intends to revisit polymer currency seriously.

Interested domestic and international manufacturers have been asked to submit bids by August 18 for supplying opacified polymer substrate sheets suitable for Indian banknotes.

RBI Governor Sanjay Malhotra has also confirmed that polymer banknotes remain under active consideration.

Whether India ultimately adopts plastic currency on a large scale will depend on a careful assessment of manufacturing costs, supply-chain resilience, environmental impact and long-term cash demand.