It has been one month since the Government of India declared India’s two largest currency banknotes to not be a legal tender speculating demand for cashless transactions and plastic currency banknotes. With new notes to be introduced, there have been various questions on why the government isn’t introducing long life durable plastic currency banknotes (polymer). On 9th of December, the Government has informed the Parliament that it wants to introduce long life durable plastic currency in order to curb various problems majorly being counterfeit notes. In this post, we will discuss about polymer notes, how it was introduced into the world, it’s pros and cons and how would India face problems in introducing polymer notes.
How did plastic currency banknotes (polymer) start in the world?
Approximately 50 years back, in the year 1967, the Australian government detected the rise of counterfeit banknotes in the country due to easy availability of colour photocopiers in the nation to the public (which was exclusive only to the government initially). In order to curb the menace, the Australian government first introduced polymer notes of 10 Australian Dollars, in 1988 and fully adopted in all currency notes in 1996.
While Reserve Bank of Australia in association with Innovia Films is the first successful company to print secured plastic currency banknotes (polymer), it was first printed by American Bank Note Company for Costa Rica, Haiti, Venezuela, Ecuador and Honduras but they were withdrawn soon because the ink started fading out due to high atmospheric temperature in the early 1980s (1980-83 to be precise).
Security features of Plastic currency banknotes (Polymer)
Best known security features of Plastic Currency Banknotes (Polymer)
- Intaglio strips
- Latent Images
- Optically variable Ink
- Large Window
- Metallic Symbols
- Metallic portrait
- Transparent Images
- Raised Ink
- Hidden Numbers
- Magnetic, fluorescent and phosphorescent security threads
and many more……..
The plastic currency banknotes are made using Biaxially Oriented Polypropylene substrate (BOPP) which is processed by Opacifying two layers of ink on the notes such that it doesn’t smudge, on which security threads are printed and a final coat of varnish is given to protect the note from foreign elements.
Countries which have introduced in all denominations
- Australia first in 1988
- Brunei first in 1996
- Canada first in 2011
- New Zealand first in 1999
- Papua New Guinea first in 1991
- Romania first in 1999
- Vietnam first in 2001
All the above countries introduced polymer currencies to curb the menace of counterfeit notes which played an important factor above cost of production.
Countries which have successfully withdrawn plastic currency banknotes (polymer)
- Indonesia first introduced plastic currency banknotes in 1999 in 100,000 rupiah denomination (approx. INR 100) was withdrawn to replace with paper note in 2004.
- Costa Rica introduced plastic currency banknotes in 1982 and withdrew it the next year due to smearing of the ink on the note.
- Thailand issued 50 Baht banknote in 1997, started reissuing the same denomination in 2004 as paper currency banknote.
- Nigeria introduced plastic currency banknotes in 2007, which it withdrew in 2014 due to smudging of inks despite its introduction only in low denominations.
- The Central Bank of Bangladesh withdrew the 10 taka plastic currency banknote in 2013 to return to old format of paper currency notes.
There were many reasons like not suiting tropical climates, difficult to handle, etc…. behind the withdrawal of plastic currency notes.
Advantages of plastic currency banknotes (polymer)
- High security features polymer notes have in comparison with paper currency banknotes like shadow images, optical variable devices, transparent portrait, etc.…
- Long life as on an average polymer notes have 2.5 times the life of a paper currency banknote.
- These notes after their average life span can be recycled to make various other products making it environmentally friendly.
- Waterproof notes as they are not affected by dirt or moisture and can be cleaned easily.
- Difficult to make counterfeit notes owing high cost and some tertiary security features only detected by machines and Reserve Bank officials
Disadvantages of plastic currency banknotes (polymer)
- High production cost
- Recalibration of all ATMs is necessary
- Cash vending machines present in the country become obsolete, thereby leading to rise in demand for the same
- Difficult to fold these notes and are too slippery in nature
- These notes are heavily dependent on environmental conditions. Countries like Nigeria and Costa Rica withdrew polymer notes because of the tropical climate in their nations.
- No proper recycling machinery available in lesser developed countries which may increase pollution due to bad disposal.
Welcome to India!
After knowing about what is a plastic currency banknote (polymer) we can now discuss about the situation of India.
Firstly, the idea of plastic currency notes in India was conceived by the Congress-led United Progressive Alliance government when they decided to issue 1 Billion 10 Rupee notes in 2009. The announcement never came into effect.
The Reserve Bank of India comes with a bang again in 2013 to introduce plastic currency banknotes (polymer) in Shimla, Kochi, Bhubaneswar, Jaipur and Mysore as these cities have different extreme climates across the country, which was pushed again with an announcement in February 2014 in the Parliament, but nothing took off thanks to the 2014 General elections.
The government has mooted the introduction of plastic currency banknotes on 9th December, 2016 by announcing to the parliament about the same.
Should India introduce polymer notes?
Short Answer: – No.
Long Answer: – Why?
- India must firstly promote cashless transactions rather introduce long life polymer notes, prompting use of cash-50% untraceable transactions.
- We must reduce the impact on the environment by using less non-biodegradable products. While the developed world can afford the proper conversion of plastic notes into useful products, India still doesn’t have such system in place.
- The latest demonetization is the best example. The government is still not able to sustain the needs of cash in the country by using the traditional currency banknotes, how will the government sustain the demands of plastic banknotes.
- The cost of production of new plastic currency banknotes is very high which is difficult for the government to explain in the budget (especially for a low denomination of Rs.10).
- The ATMs need to be calibrated. With a calibration of 2 lakh ATMs in India to the new Rs.2000 took a month or so, dispensing from the ATMs would require a new program to dispense these notes.
- The cash vending machines in most business outlets (98% of the transactions by volume still happen using cash) need to be replaced as old machine turn obsolete.
- They are hard to fold, stick to the hand and slippery to count, making it difficult for most moist Indian hands.
- India is one of the only countries in the world which has all types of climates, religion, languages, etc.… While the latter two don’t affect polymer notes, climate does play a significant role. With varying temperature at different cities and towns in India, can these notes retain the same properties as they were introduced by the RBI? I doubt as it is universally accepted plastic currency notes depend majorly on outside temperature and humidity.
- The recent introduction of Rs.500 note had two variants (printing error most probably — Finance Minister has stated that both the notes are a legal tender), Can the government assure the no fading/smudging of the ink in the newly introduced notes in cities with extreme climate?
- Lastly, plastic currency banknotes (polymer) has been tried by various companies and countries, but all failed rather Guardian Polymer notes introduced by the Reserve Bank of Australia and Innovia Films are used to make local currency notes in over 30 countries in the world. This shows that RBA is by default in a monopolistic situation currently, manufacturing notes for all. Can we trust a private company in association with the Reserve Bank of Australia to print our currency banknotes using their technology? Well, Australia is a developed nation (bribing high officials for introduction of polymer notes in various countries is still under trial in Australian courts), but some issues cater national security interests which must be taken into consideration.
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(Engineer By Profession, Blogger By Choice)