Proposal for polymer banknotes under consideration: RBI Governor Malhotra

RBI Governor says the central bank is assessing the merits and challenges of polymer banknotes even as cash usage and currency circulation continue to grow

The Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said that a proposal for polymer banknotes is under consideration with the banking regulator evaluating the pros and cons of the same.

 

“The proposal for polymer notes is under consideration. Whatever news articles have come, there is some truth in it,” Malhotra said in the post-policy media interaction. He was responding to questions about media reports saying the central bank was exploring introduction of such notes.

 

The paper currently being used for printing of banknotes is made by using 100 per cent cotton.

 

“We are examining the pros and cons of it and whether it will be worthwhile to do it. It is still at a preliminary stage,” Malhotra said in his post policy press meet.

 

According to the central bank’s annual report, a survey was conducted on households’ payment behaviour among individuals and small retail sellers to understand usage and preference for cash and digital modes of payment. The survey results indicated continued strong preference for usage of cash. This is also reflected in the robust growth of banknotes in circulation for FY26.

 

The RBI report said the value of banknotes in circulation increased by 11.9 per cent year-on-year (Y-o-Y) to ₹41.23 trillion by the end of March 2026. In volume terms it increased by 10.5 per cent Y-o-Y to 171.32 billion.

 

In value terms, the ₹500 note constituted 85.5 per cent of the total, marginally down from 86 per cent last year. The smaller denomination notes, ₹10 and ₹20, constituted 0.7 per cent each, the report said.

 

According to the report, the expenditure incurred on security printing during the year was ₹4,875.2 crore in FY26 as against ₹6,372.8 crore during the previous year, due to reduced indent of banknotes during 2025-26.

 

There were similar efforts in the past. 

 

In 2012, the then government decided to introduce one billion pieces of ₹10 banknotes on polymer substrate on a field trial basis in five cities. The primary objective of introduction of polymer notes was to increase its life and not to combat counterfeiting, the then United Progressive Alliance (UPA) government had said. The project was shelved due to technological challenges.