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The Reserve Bank of India (RBI) seems to have shelved its project to implement plastic banknotes due to concerns about the ability of the currency notes to withstand Indian climatic conditions, characterised by high temperatures.
Moreover, with the Unified Payments Interface (UPI)-based transactions growing by leaps and bounds and the planned launch of Central Bank Digital Currency (CBDC) in FY23, the need for introducing plastic banknotes has diminished.
Per RBI’s 2015-16 annual report, a billion pieces of banknotes in denomination of ₹10 were to be printed on all available plastic (polymer) substrates and issued to the public in five cities having different climatic zones — Kochi, Mysuru, Shimla, Jaipur and Bhubaneswar, on a trial basis.
The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) and the Security Printing and Minting Corporation of India Limited (SPMCIL) have taken up this project.
But not much headway could be made in this regard due to reasons such as the possibility of plastic banknotes reacting to high temperatures and catching fire and UPI-based transactions gaining traction.
While polymer banknotes have a long life, weigh less and are waterproof vis-a-vis paper bank notes, Bankers emphasise that once the former react to high temperatures, it may be difficult to get them exchanged.
However, soiled and mutilated paper currency notes can be easily exchanged across Bank and RBI counters.
UPI-based transactions
According to RBI data,the volume of UPI-based transactions soared by 100.50 per cent year-on-year (yoy) to 46,171.56 lakh in January 2022 (23,027.28 lakh in January 2021), with the value of transactions jumping about 93 per cent to ₹8,31,993 crore in January 2022 (₹4,31,182 crore in January 2021).
In a July 2021 speech, RBI Deputy Governor T Rabi Sankar had observed that “A CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.
“...Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk.”
Sankar noted that introduction of CBDC will possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option.
“There are associated risks, no doubt, but they need to be carefully evaluated against the potential benefits. It would be RBI’s endeavour, as we move forward in the direction of India’s CBDC, to take the necessary steps which would reiterate the leadership position of India in payment systems,” he said.
Ordinary users: Mixed reactions
A June 2016 article by Ping Wang, Communications Officer, IMF, captured ordinary users’ mixed reactions to the polymer bills’ plasticky feel.
According to the article, Zoë Martin, a tutor in Toronto, Canada, opined that, “They stick to each other because of static cling, they don’t fold up nicely like paper bills when they’re new, and they’re slippery so they slide out of your pocket.”
But Michael Brienza, a Toronto day care teacher, said, “I prefer them; they’re so much cleaner. The paper bills got all grimy.”
“Peter Cecil Sinnott, a data science graduate of Montreal’s McGill University, says,‘The fact that they’re waterproof means getting them wet isn’t going to cost you.
‘True story: my sister once found one of the new Canadian $100 bills while snorkeling in the tropics. Who knows how long it was sitting on that reef?’”quoted Wang.
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