Will Plastic Notes Replace Paper Money?

India is the undisputed global leader in digital payments, accounting for nearly 49% of the world’s real-time digital transactions. The Unified Payments Interface (UPI) facilitates over 66 crore transactions daily.

However, the Reserve Bank of India is considering the introduction of polymer banknotes into circulation. The proposal was mooted a decade ago in the wake of the surging cost of printing paper currency and pulling out of billions of soiled notes out of circulation with each passing year.

In the near future, the RBI is likely to announce a pilot project. As part of it, lower denomination notes, Rs 10 and Rs 20 in particular, are likely to be tested, and understand how fast they would wear in the circulation.

Let us understand the benefits of polymer notes.

Unlike paper currency, polymer notes are more durable, lasting nearly 3-5 times longer and resistant to tearing and folding. They are resistant to dirt and moisture too, relevant to India’s climate and usage conditions.

The polymer notes have non-porous surface, repelling dirt, sweat, moisture and bacteria. Traditional paper notes absorb moisture and bodily oil, easily transmitting germs.

Initially, the manufacturing and printing cost would be higher for the polymer currency but it would be economical over time, as the replacement frequency would be reduced. Comparatively, paper currency would cost less during the initial printing stage but would become expensive due to soiling and re-printing requirements.

The RBI data shows expenditure on printing currency notes has risen to a peak of Rs 6,372 crore in FY25, before falling to Rs 4,875 crore in FY26.

Post demonetization, the costs had surged up to Rs 7,965 crore in FY17 for rolling out new currency notes.

At the same time, polymer notes are recyclable while paper notes cannot be repurposed and get into the landfills after shredding.

Globally, several countries like Australia, Canada and the UK have completely shifted to polymer currency.

With the RBI attempting to revive its proposal of polymer currency, it has to be seen how it would cut down the government’s expenditure on its sustenance.