RBI to issue polymer notes of Rs 10

23 Mar 2010, 0252 hrs IST, ET Bureau

MUMBAI: The Reserve Bank of India will soon issue 100-crore polymer notes of Rs 10 denomination to improve their longevity and to thwart counterfeiters.

These notes will initially be introduced by RBI in five cities. This was disclosed by RBI governor D Subbarao while speaking at the Foundation Stone laying function for the Bank Note Paper Mill at Mysore. Globally, currency authorities in many advanced economies such as Canada and Australia have already tried their hands in polymer currencies.

The governor said polymer notes were more environment friendly. “Considering the relatively long life of polymer notes and their amenability to re-cycling, the ‘carbon footprint’ of polymer notes vis-à-vis paper banknotes is likely to be on the plus side. Regardless, this is one of the issues that we will study during the pilot phase, and will embark on polymer notes on a long-term basis only if the cost-benefit calculus is decidedly positive in all dimensions,” he added.

This year India will print around 17 billion pieces of paper currency. “Producing our own paper is decidedly cheaper, and a check against counterfeiting,” he said. India’s demand for banknote paper — 18000 MT per year — is huge in international terms, and on the supply side there are just 3/4 large producers. “This situation exposes us to vulnerabilities of a suppliers market in terms of price, quantity and timelines, something that we should avoid or minimise,” Mr Subbarao said. He noted that major countries like the US, Japan, China, Brazil, Russia and countries in the euro area and even smaller countries like South Korea, Indonesia, Iran and Pakistan make their own bank note paper.

Giving his analysis of the trend in counterfeiting he said: “By an international metric, the incidence of counterfeit notes in India is not alarming,” adding that counterfeiting per se is a matter of serious concern for the government and RBI.

While Australia detected seven pieces of counterfeit notes per million notes in circulation (2008-09), in Canada it was 76 (2008). In New Zealand, there are 0.71 counterfeits per million notes in circulation (2008-09), whereas in Switzerland it was 10. As for the euro, there was roughly about one counterfeit per 14,600 bank notes in circulation (2008).

In India, fake notes reported as detected by banks and fake notes found in remittances received by RBI in 2008-09 amounted to eight for every one million notes in circulation. The data, however, does not include the counterfeits that are seized by the police, Mr Subbarao clarified.