India is going to have its first polymer or plastic currency notes in public circulation in the beginning of next financial year, if the trials go as per plan. RBI (Reserve Bank of India) governor Sanjay Malhotra has said this on Wednesday.
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RBI is currently testing the notes in a pilot project and checking how will they perform in India's weather and day-to-day use. If it passes on the test then the notes will be rollout widely.
While talking about RBI's monetary policy announcement, Sanjay Malhotra said that the notes are being introduced to mainly improve the durability of currency, especially the lower denomination notes that circulates frequently.
"The polymer notes are for two purposes. One is the durability in their life. This is especially for lower denominations where velocity is higher and, therefore, lifespan is lower. The second purpose is it expands our capacity as the needs of the economy increase," he said.
The polymer banknotes are already being used in countries like Australia, Canada and United Kingdom. The RBI governor said that these notes last three to four times longer than these regular paper currency that also reduces replacement cost with the time.
However, RBI has confirmed that the project is still in its testing phase. The test is going on to check the quality and sustainability of the notes in India's different weathers, its handling practices.
"It's still a pilot. We will test, check as to how they perform in the Indian conditions, climate and other infrastructure that we have put in place and it's only thereafter that we will see if we need to further scale it up as it is or with changes," Malhotra said.
RBI has also issued a tender to procure polymer substrate, the special material used to manufacture plastic notes. Once the printing, testing and all the security checks are completed, then the notes will be considered for public circulation.
While sharing the expected time for the plastic notes, RBI governor Sanjay Malhotra added, "We are targeting that they (polymers) are in circulation, if everything goes as per plan, in the beginning of the next financial year."
Now if the tests get successful, these polymer notes will be a great addition to India's currency system. Every year India replaces millions of damaged currency notes due to heavy circulation, now if polymer notes get approved then it will be more resistant to moisture, dirt and not easy to tear like paper notes. It will be a very important step for India as despite digital payments are growing but despite that cash is still the preferred choice for Indians.