India to start field trials for 100 crore polymer notes of ₹10, ₹20 each: What's next for paper ones?

The Centre has approved the Reserve Bank of India's (RBI) proposal for field trials of 100 crore pieces each of the ₹10 and ₹20 denominations.

The Centre notified the Parliament of the move on Tuesday, which the RBI had earlier proposed based on the recommendation of its central board, in line with Section 25 of the Reserve Bank of India Act, 1934.

The proposal had also suggested that polymer notes could enter regular circulation if the field trials were successful.

The move was announced by Minister of State (MoS) for Finance, Pankaj Chaudhary, in a written response to a question in the Lok Sabha.

News of the proposal weeks ago had already sparked concerns about how the field trials would impact the paper-based notes currently in existence.

"There is no proposal to replace paper currency with polymer substrate-based banknotes," Chaudhary added in his response, adding that the new notes will be trialled alongside paper notes.

Responding to questions of the new banknote trials affecting the digital payment ecosystem, Chaudhary also noted that the polymer notes were only entering circulation on a trial-basis, due to which it was too early to talk about their impact on digital payments.

Why polymer?

According to the central bank, the biggest reason for trying out a switch was durability. And what better denominations to test this out than two of the most frequently used ones—₹10 and ₹20?

The RBI proposal had also cited studies showing that the lifespan of polymer notes was higher than paper-based notes, because they are more resistant to water, dirt and tearing.

It also said that though these notes cost more to produce initially, governments around the world had found out that these lasted longer in circulation, which recovers some of the initial costs.

Polymer notes are also said to offer stronger protection against counterfeiting because they can incorporate advanced security features that are difficult to copy, due to which a number of countries around the world use similar materials for their currencies, such as the United Kingdom, Australia, Canada, and New Zealand.