A pilot study will be started soon in five cities of plastic banknotes of Rs 10 denomination. It has been a long delayed process and we hope to start it this year said a senior government official.
Kochi Mysore, Jaipur, Bhubaneswar and Shimla have been identified for the pilot test where one billion plastic currency notes will be issued.
The Reserve Bank of India has floated a tender for printing the bank notes, which is likely to be opened soon.
Security clearance was given last year and about eight firms have shown interest, said the official, adding that the notes may have to be printed abroad as India does not have the technology.
Based on the results of the pilot test, the government will take a call on the introduction of plastic notes.
The plan, at present, is to gradually phase out paper notes across the country, possibly starting with lower denomination notes and then moving on to high value notes of Rs 100 and above.
The finance ministry and the RBI have been working on the concept of polymer or plastic currency notes since 2010 since these are more durable than their paper counterparts.
Another advantage with such notes is that they are more difficult to counterfeit.
However, since the technology is new and not available in the country, polymer notes are more expensive to print than paper currency. Further, the notes also have to be tested for their durability in hot weather.
These are factors that are in consideration. The pilot study will throw more light on these issues, said the official.
Plastic notes have gained currency in over 30 countries in the past few years. Australia was the first country to introduce plastic bank notes in 1968.
Since then, others including Canada and Singapore have also switched to plastic notes.