RBI to rollout Rs 10, Rs 20 polymer banknotes

• The central government has approved the Reserve Bank of India’s proposal for introduction of one billion pieces each of Rs 10 and Rs 20 polymer banknotes, Minister of State for Finance Pankaj Chaudhary said in a written reply in the Lok Sabha on July 27.

• The RBI, with the recommendation of its Central Board, had sent a proposal to the government in terms of Section 25 of the Reserve Bank of India Act, 1934.

• Section 25 states that the design, form and material of bank notes shall be such as may be approved by the central government after consideration of the recommendations made by the Central Board of RBI.

RBI’s plan to introduce polymer banknotes

• The plan is to introduce one billion pieces each of Rs 10 and Rs 20 polymer banknotes for field trials and for regular issuance of polymer banknotes in these two denominations after successful completion of field trials. 

• As per international studies, the life span of polymer banknotes is significantly higher than that of paper banknotes. 

• The introduction of polymer banknotes is currently in a preliminary phase. 

• As per the RBI, polymer banknotes are proposed to be issued along with paper substrate-based banknotes.

• There is no proposal to replace paper currency with polymer substrate-based banknotes.

• Over the years, central banks across the world have been exploring different solutions for extending the lifecycle of banknotes. 

• These include introduction of plastic banknotes and other developments in banknote substrates for enhancing durability of the notes.

• During 2012-13, the UPA government had a plan to introduce 100 crore Rs 10 banknotes made of polymer substrate on a field trial basis in five cities. However, the plan was dropped.

RBI’s role in issuance of currency and its management

• RBI plays a unique role in the matter of monetary policy and issuance of currency.

• The RBI Act has been enacted to regulate the issue of bank notes and generally to operate the currency and credit system of the country.

• Section 3 of the RBI Act provides that the RBI has been constituted for the purposes of taking over the management of the currency from the central government and carrying on the business of banking in accordance with the provisions of the RBI Act.

• Section 22(1) of the RBI Act provides that the RBI shall have the sole right to issue bank notes in India.

• The Indian currency is called the Indian Rupee (INR). The symbol of the Indian Rupee is ₹. The design resembles both the Devanagari letter ‘₹’ (ra) and the Latin capital letter ‘R’, with a double horizontal line at the top.

Currency management

• The banknote printing started in India in 1928 with the establishment of India Security Press in Nashik. Until the commissioning of the Nashik press, the currency notes were printed from Thomas De La Rue Giori of the United Kingdom. 

• The second banknote printing press was established in Dewas (Madhya Pradesh) in 1975. 

• With the growth in population and economic activity, the demand for banknotes has been steadily increasing. To bridge the demand and supply gap, the government decided to establish two banknote printing presses, one at Mysuru and the other at Salboni (West Bengal).

• The Reserve Bank has the sole authority to issue banknotes in India. The Reserve Bank, like other central banks the world over, changes the design of banknotes from time to time.

• Currency in Circulation (CiC) includes banknotes and coins. 

• The Department of Currency Management has the responsibility of administering the functions of currency management, a core function of the Reserve Bank in terms of the Reserve Bank of India Act, 1934. 

• Currency management essentially relates to issue of notes and coins and retrieval of unfit notes from circulation. 

• This work is performed through 18 issue offices of the Reserve Bank and a wide network of currency chests, repositories and small coin depots managed by banks and government treasuries.

• The Department receives notes from four currency note printing presses. 

Printing of notes

• Banknotes are printed at four currency presses, two of which are owned by the government through Security Printing and Minting Corporation of India Ltd. (SPMCIL) and two are owned by the Reserve Bank, through its wholly owned subsidiary Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL). 

• The currency presses of SPMCIL are Bank Note Press (BNP) in Dewas and Currency Note Press (CNP) in Nashik. 

• The two presses of BRBNMPL are at Mysuru and Salboni.

• Coins are minted in four mints owned by the government. The mints are located at Mumbai, Hyderabad, Calcutta and Noida.

• The coins are issued for circulation only through the Reserve Bank in terms of Section 38 of the RBI Act.