The Reserve Bank of India (RBI) announced this week that the country will begin a trial period of introducing polymer banknotes in circulation in order to eliminate the backlog of unusable worn banknotes throughout India and to combat counterfeiting.
The RBI says that India has seen a 95 per cent increase in counterfeit notes in the country over the past five years.
“India needs to invest more to make the system robust. Counterfeiters are becoming more tech savvy and larger interests may be involved,” said Mohandas Pai, a member of the RBI’s expert committee on currency distribution.
Polymer banknotes not only include advanced security features, but the chemical bonds used in the creation of polymer also make the banknote more durable – a feature that is highly appealing to the RBI.
Much like Ukraine (read: Russia to stop making 10-ruble banknotes), India remains a largely cash-preferred country. In marketplaces and shopping centers, “grubby banknotes are legion – ripped, sullied, scribbled on or simply overused to the point of illegibility. Nobody wants them and, if you’ve got one, spending it is going to involve either subterfuge or confrontation.”
The RBI said that 12 billion notes were classed as “soiled” as of March 2009, and admits that maintaining quality is a “huge challenge”.
Many countries around the world use polymer banknotes, including Australia, New Zealand, Romania and Vietnam.
India’s trial period for polymer banknotes could begin as early as next year, however the changes to the currency – from cotton blend paper banknotes to polymer banknotes – will only target India’s 10-rupee banknotes.
RBI officials have said the initial plan is to introduce one billion 10-rupee notes before the end of 2010.
Even with the anticipated switch, approximately 95 per cent of the country’s currency will still be printed on traditional cotton banknote paper.
For more about polymer banknotes read Polymer banknotes of the world.