Everybody has lost money, due to currency notes being washed along with dirty laundry. The washing machine, however, may no longer be able to eat your money. Arjun Ram Meghwal, minister of state for finance, recently told Lok Sabha that “it has been decided to conduct a field trial with plastic banknotes at five locations of the country. Approvals for procurement of plastic substrate and printing bank notes of Rs10 denomination on plastic substrate have been conveyed to the RBI (Reserve Bank of India).” Let’s know more about these notes.
“Plastic banknotes are expected to last longer than cotton substrate-based banknotes,” said Meghwal, and added, “Central banks across the world have been exploring different solutions for extending the lifecycle of banknotes. These include introduction of plastic banknotes.” The pioneer in plastic notes is Australia, which started using them in January 1988.
Since then, they have been circulating in countries like New Zealand, Canada, Scotland, Vietnam, Brunei and Papua New Guinea. Bank of England started circulating plastic-based notes of £5 on 13 September 2016. It plans to issue £10 plastic notes from September 2017 and £20 notes by 2020. The bank estimates that these notes last up to 2.5 times longer than paper-based notes. In the long run, polymer notes are expected to reduce expenses incurred on printing currency, as they last longer. According to the Reserve Bank of India, the total expenditure incurred on security printing stood at Rs3,420 crore during 2015-16 (July-June) and Rs3,760 crore during 2014-15.
Changing currency notes can be tricky, because we first need to upgrade the entire infrastructure. We recently saw some of these issues crop up, when ATMs had to be recalibrated because they could not handle the new currency notes introduced after demonetization.
Also, it needs to be seen how these notes will perform in India, which experiences extremes of weather. It is reasonable to ask whether the plastic notes would be able to withstand the extreme heat of India. This is why the trial of plastic notes is expected to be conducted in five cities— Kochi, Mysuru, Shimla, Jaipur and Bhubaneswar—which are in different climatic zones. If the trial run is successful, we may see more plastic notes.