Plastic notes only after satisfying ecological concerns: RBI

The Reserve Bank's ambitious plastic currency note programme runs the risk of falling victim to ecological issues and the roll-out will depend on a study of the project's impact on the environment.

The RBI is in the process of starting a pilot project for issue of plastic currency notes, wherein plastic notes of Rs. 10 denomination would be distributed through the central bank's five regional offices.

The proposed shift to plastic currency notes, instead of the normal paper notes, is primarily aimed at checking the high cost associated with printing of paper currency, as they need early replacement due to soiling and mutilation.

Besides studying the potential cost savings through plastic notes, the pilot project will also look into the environmental impact of the proposed plastic notes.

In an address at a convocation last week at Sambalpur University in Orissa, RBI Governor D Subbarao also said the central bank would need to study the "carbon footprint" of recycling and disposal of plastic notes.

"During the pilot phase, we need to study not only the relative costs, but also the carbon footprint associated with the recycling and disposal of plastic notes vis-a-vis paper notes," he added.

Subbarao said the RBI would "mainstream the use of plastic currency" only after the success of the pilot project.

A detailed mention of environment aspects was also mentioned for the first time in this year's Economic Survey.

At a time when the government is trying to balance the twin challenges posed by climate change and achieving economic growth, the Survey called for steps to ensure that green growth strategies do not result in slow growth.

Terming cost and longevity as important for currency management, Subbarao said that India was the second largest producer and consumer of currency in the world after China.

He said that producing such a large amount of currency was expensive and one option to cut the costs was replacement of paper currency with plastic notes.

Some of the countries to have moved to plastic currency notes include Singapore and Australia.

In April, 2010, the RBI floated a tender seeking supply of one billion plastic notes of Rs. 10 denomination.

Later in August, the central bank said in its annual report for 2009-10 that it was exploring methods to increase the life of currency notes, especially those of lower denomination, which have a much shorter life.

"The Reserve Bank, in consultation with the government, has initiated steps to conduct a field trial of plastic notes in the denomination of Rs. 10 in the year 2010-11 to gather valuable lessons," the report added.

Source: Financial Express