Mumbai: India Says No to Plastic Currency, The Reserve Bank of India had planned to print banknotes in the denomination of ₹ten on plastic for test use by the public in five cities with different climatic zones; Kochi, Mysuru, Jaipur, Shimla and Bhubaneswar, on a trial basis. However, after long research, the implementation has been shelved due to concerns about the currency notes withstanding Indian climatic conditions under high temperatures. The plastic notes are susceptible to catching fire.
Polymer banknotes are shaped from a synthetic polymer, biaxially oriented polypropylene (BOPP), an explosive chemical. Although fire-prone, such notes incorporate several security features not available in paper banknotes, including the use of metameric inks. Plastic notes last five times longer with low environmental impact, production, and replacement costs. They perform better in ATMs. Polymer notes are complicated to counterfeit, carrying multiple security features, difficult-to-copy transparent windows, hidden numbers, text printed in a tiny font and metallic holograms.
Plastic money stays cleaner than paper as the non-porous surface doesn’t absorb body oils or liquids. The notes are waterproof and protected if left in a pocket in the washing machine. Plastic money can be bent and twisted without damage. It is also less likely to spread disease because it’s harder for bacteria to cling to the slick, non-absorbent surface.
Countries using plastic money save costs due to the longer life of polymer notes, although the plastic banknotes cost more to print than paper equivalents. Plastic money is good for the environment as it is recycled to manufacture plastic products like mugs and buckets. The polymer notes generate 32% fewer greenhouse gas emissions and a 30% reduction in energy needs over the entire life cycle.
The Reserve Bank of Australia first developed the polymer banknotes as currency in 1988. New Zealand followed soon after. Romania issued plastic notes in 1999 and became the third country to convert to the polymer by 2003 fully. Other currencies that have switched entirely to polymer banknotes include the Vietnamese đồng (2006), the Brunei dollar (2006), the Nigerian Naira (2007), the Papua New Guinean kina (2008), the Canadian dollar (2013), the Maldivian rufiyaa (2017), the Mauritanian ouguiya (2017), the Nicaraguan córdoba (2017), the Vanuatu vatu (2017), the Eastern Caribbean dollar (2019) and the Pound sterling (2021). America has not yet switched to the plastic currency notes.
The currency notes are traditionally printed on paper made from cotton rags in India. RBI prints all denominations except one rupee note signed by the Finance secretary, not by the governor of the RBI.
The government spends Rs 4.18 on each Rs 2,000 note. The 500 note consumes Rs 2.57, and for Rs 100 notes, it is Rs 1.51. The old Rs 1,000 note was printed for Rs 3.54. Thus, the printing of the new Rs 2,000 note costs 64 paise more than the printing of the Rs 1,000 note. The cost of printing ₹50 and ₹500 has come down, while it has gone up for ₹10, ₹20 and ₹100 notes.No indents were placed for printing ₹2,000 notes since FY20. The average life of an Indian currency note is six months due to the abrupt storing habits of Indians.
Unfortunately, the project stands abandoned due to the susceptibility of plastic banknotes catching fire. Bankers emphasise that plastic notes react to high temperatures, get soiled and pose a challenge for large circulation in cash-oriented economies like India. Significant difficulties associated with the processing and destruction of the polymer banknotes made Nigeria’s Central Bank attempt the switch back from polymer to paper banknotes soon after its launch.
With the Unified Payments Interface (UPI) transactions growing and the planned launch of Central Bank Digital Currency (CBDC) in FY23, the need for plastic banknotes has diminished. Encouraging utilisation of UPI-based transactions soaring by 100.50 per cent year-on-year to 46,171.56 lakh in January 2022 from 23,027.28 lakh in January 2021 has also made the plastic rupee irrelevant. As per users, the polymer notes stick to each other; they don’t fold up nicely like paper bills when they’re new, are slippery, and slide out of pocket. Businesses operating in the UK financial world have opposed the control of polymer, questioning the cost impact of its introduction.
RBI is, therefore, justified in saying no to the plastic currency for India.
~ Hargovind Sachdev
