RBI Evaluating Polymer Currency Notes As Cash Circulation Continues To Rise

The Reserve Bank of India (RBI) is examining the possibility of introducing polymer banknotes, Governor Sanjay Malhotra said on June 5, 2026, indicating that the proposal remains at an early stage of evaluation. Malhotra made the remarks during the post-policy press conference following the announcement of the Monetary Policy Committee (MPC) decisions.

Proposal Under Preliminary Review

Responding to questions on reports that RBI was exploring polymer-based currency notes, Malhotra said that there was some basis to the speculation. “The proposal for polymer notes is under consideration. Whatever news articles have come, there is some truth in it,” he said.

He added that the central bank was weighing the potential benefits and drawbacks before deciding on the way forward. “We are examining the pros and cons of it and whether it will be worthwhile to do it. It is still at a preliminary stage,” Malhotra said.

At present, banknotes in India are printed on paper made from 100 per cent cotton. Polymer notes are manufactured using a plastic-based substrate and are generally known for their longer lifespan compared to conventional paper currency.

Cash Remains Widely Used

RBI’s latest annual report suggests that cash continues to play an important role despite the growth of digital payment systems. According to the report, a survey of households and small retail sellers has shown a strong preference for cash transactions. This trend was reflected in the continued growth of currency in circulation during FY26.

The value of banknotes in circulation rose 11.90 per cent year-on-year (y-o-y) to Rs 41.23 trillion, as of March 2026. In terms of volume, the number of banknotes in circulation increased 10.50 per cent y-o-y to 171.32 billion pieces.

The Rs 500 note remained the dominant denomination, accounting for 85.50 per cent of the total value of currency in circulation, compared to 86 per cent a year ago. The Rs 10 and Rs 20 notes each accounted for 0.70 per cent of the total value.

Printing Costs Decline

The annual report has also presented a decline in expenditure on security printing. The RBI spent Rs 4,875.20 crore on security printing during FY26, compared to Rs 6,372.80 crore in the previous year. The decline was attributed to a lower requirement for printing banknotes during the year.

Earlier Polymer Note Experiment

The idea of polymer banknotes has been explored before. In 2012, the government approved a field trial involving one billion pieces of Rs 10 polymer notes across five cities. At the time, the objective was to increase the durability of banknotes rather than tackle counterfeiting. However, the initiative was later shelved due to technological challenges.