Bye Bye Paper Money? RBI Governor Sanjay Malhotra Drops Hint At Plastic Currency Plan After RBI MPC Speech

India's currency notes are set for a major shakeup, as the Reserve Bank of India is reportedly considering a proposal to introduce polymer currency notes in a phased manner. The proposal to bring plastic currency notes in circulation is at a very initial stage, said RBI Governor Sanjay Malhotra on Friday, as per an Indian Express report.

Earlier in the day, RBI Governor Sanjay Malhotra announced during the MPC policy statement that the Monetary Policy Committee had decided to keep the repo rate unchanged in its June meeting.

RBI's Proposal For Plastic Currency Notes

Sanjay Malhotra's recent statement on plastic currency notes has come nearly ten years after RBI considered the proposal for the first time. Growing chatter around replacement of paper currency notes with plastic currency came amid surging cost of production of currency notes.

First Proposal For Bank Currency Notes

The proposal for plastic currency notes came back in February 2014. At that time, the government had planned a trial of one billion Rs 10 notes. The trial was supposed to be held in five different cities including Kochi, Mysore, Jaipur, Shimla and Bhubaneshwar. However, the plastic currency note trial was stopped back then.

What Are Polymer Notes?

Polymer notes use a thin plastic material. They are not made of cotton paper. They are very flexible like paper money. These notes resist dirt, moisture, and tearing. They last much longer than paper cash. They also feature stronger anti-counterfeiting elements.

Rising Popularity of Cash Notes

While a huge section of Indian population has now shifted completely to digital transactions, demand for currency notes has increased for lower denomination notes like Rs 20 and Rs 50. Currency in circulation rose 11.5 per cent last year. It reached a record Rs 42.86 trillion. This figure was recorded on May 15. Demand for small notes like Rs 10 remains high.

Use of coins has also grown. Supply rose to 1.5 billion pieces in FY25. This was up from 1.2 billion in FY24. Rs 5 coins made up 800 million. Rs 20 coins followed with 400 million.
The government tried this idea before. In 2014, it approved a field trial. It involved one billion Rs 10 polymer notes. The trial spanned across five different cities. The project stopped due to technical challenges.

RBI MPC Announcement

The Reserve Bank of India's Monetary Policy Committee (MPC), on Friday, June 5, kept the repo rate unchanged at 5.25% in light of elevated energy prices, geopolitical tensions due to West Asia crisis, and global uncertainty. The central bank had also kept its stance as 'neutral'.