India could soon see plastic currency notes entering circulation, with the Reserve Bank of India (RBI) reviving a long-pending proposal to introduce polymer banknotes through a pilot programme.
The move is being considered as the demand for cash continues to grow sharply, even as digital payments gain wider acceptance across the country. The proposal reportedly figured in recent RBI board meetings.
Officials believe plastic notes can remain in circulation far longer than paper notes, reducing the frequency of replacement and cutting printing expenses over time. The RBI is also confident that ATM networks can now be adapted to handle polymer notes without major technical hurdles.
The central bank’s annual report showed that expenditure on printing currency rose to ₹6,372.8 crore in FY25 from ₹5,101.4 crore a year earlier, mainly due to higher demand for banknotes.
The RBI is also grappling with the rising volume of soiled currency being withdrawn from circulation. During FY25, nearly 23.8 billion worn-out notes were destroyed, marking an increase of more than 12 percent from the previous year. The highest number of discarded notes belonged to the ₹500 denomination, followed by ₹100 notes.
Currency in circulation continued to climb despite rapid growth in digital transactions. As of May 15, cash in circulation stood at a record ₹42.86 trillion, up 11.5 percent year-on-year.
In the first six weeks of FY27 alone, circulation expanded by around ₹1.15 trillion, reflecting sustained reliance on physical cash across segments of the economy.
Lower-denomination notes such as ₹10 and ₹20 continue to witness strong demand, according to sources, although their share in the total value of currency in circulation remains relatively small.
The RBI had earlier attempted to encourage greater use of coins, but adoption has remained limited. Coin supply increased from around 1.2 billion pieces in FY24 to 1.5 billion pieces in FY25. Among them, ₹5 coins accounted for the largest share, followed by ₹20 coins.
India had first explored polymer notes more than a decade ago. In 2012, the UPA government approved a field trial involving one billion ₹10 plastic notes across five cities. The objective was mainly to improve durability rather than address counterfeiting concerns.
However, the initiative was eventually put on hold because of technological and operational challenges. Officials now believe those issues have largely been resolved, particularly in ensuring compatibility with ATM systems and currency-handling machines.
More than 60 countries have adopted polymer currency over the years. Australia pioneered the concept in 1988 with a $10 polymer note. Countries including Singapore, Canada, Malaysia, Thailand and Romania later followed suit. US dollar bills continue to use a specialised cotton-linen blend rather than plastic substrate.
