Source: Business Standard
Context
The government has approved the RBI’s proposal to issue 1 billion pieces each of ₹10 and ₹20 polymer banknotes for field trials, Minister of State for Finance Pankaj Chaudhary told the Lok Sabha on 27 July 2026. After successful field trials, the RBI will regularly issue polymer banknotes in these two denominations.
The Approval
- The RBI, on the recommendation of its Central Board, sent the proposal to the government under Section 25 of the RBI Act, 1934.
- The proposal covered both the 1 billion-piece field trial in each denomination and regular issuance thereafter.
- The reply came as a written answer to a Lok Sabha question.
Section 25 of the RBI Act, 1934 — The Legal Basis
- It provides that the design, form and material of banknotes shall be approved by the Central Government on the recommendation of the RBI’s Central Board.
- This is why a change of substrate from paper to polymer requires government approval, not merely an RBI decision.
Why Polymer?
- Longer lifespan: the RBI cited international studies showing polymer notes last significantly longer than paper notes — typically 2.5 to 4 times.
- Lower replacement cost over time, despite higher unit printing cost.
- Better resistance to dirt, moisture and wear — relevant for low-denomination notes, which circulate hardest and soil fastest.
- Stronger security features, including transparent windows that are difficult to counterfeit.
- ₹10 and ₹20 are the correct test denominations precisely because they have the shortest life in circulation.
What Paper Notes Are Made Of?
- Indian “paper” banknotes are not wood-pulp paper — they are made from cotton pulp and plant fibres, giving greater durability and a distinctive feel.
- Polymer notes use a biaxially oriented polypropylene (BOPP) substrate.
