Reserve Bank of India is planning to introduce, on a pilot basis, plastic notes of Rs 10 denomination in the jurisdiction of five out of its 22 regional offices.

Given the fact that India is a large cash economy and producing such a large amount of currency is expensive, the RBI is exploring the option for economising by replacing paper currency with plastic money as in Singapore and Australia.

“Cost and longevity are important dimensions of currency management. We are a large cash economy. In fact, we are the second largest producer and consumer of currency in the world, next only to China. Producing such a large amount of currency is expensive. One option for economising is replacing paper currency with plastic currency,” said Dr D. Subbarao, Governor, RBI, in his convocation address at the Sambalpur University on Thursday.

During the pilot phase, the RBI will not only study the relative costs but also the carbon footprint associated with the recycling and disposal of plastic notes vis-à-vis paper notes. If the pilot proves successful, it will mainstream the use of plastic currency.

RBI - A Mysterious Institution?

In his lecture on ‘Reserve Bank of India: Making a Difference in Your Daily Life', the Governor, in a lighter vein said, “Many people think of the Reserve Bank as a mysterious institution, a sort of monolith – doing obscure things that have no relevance in the everyday lives of people. Others think that all that the Reserve Bank does is print currency, and wonder why, when short of resources, we don't just print more of the stuff. Some people think that all that the Governor does every day in office is sign currency notes, and that if there is shortage of currency, it is because he is slow in signing.”

Pointing out that the reality is quite different, Dr Subbarao said that besides printing and distributing currency, the RBI also does a lot of other things.

“We are the monetary authority of the country. We are the gatekeepers of the external sector. We regulate and supervise banks, non-bank finance companies and segments of the financial markets to ensure that the money you keep in banks is safe and is productively deployed towards generating economic activity… The Reserve Bank is also the central bank – that is it is the bank of banks and the bank of the Government of India as well as of the State governments,” Dr Subbarao said.

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