Govt approves 1 billion polymer banknotes each of Rs 10, Rs 20 for field trials

The government has authorised the introduction of one billion polymer banknotes worth Rs 10 and Rs 20 for field trials, Parliament was informed on Tuesday.

In a written response to the Rajya Sabha, the Finance Minister Nirmala Sitharaman stated that the Reserve Bank of India (RBI), on the advice of its central board, had submitted a proposal to the government under Section 25 of the Reserve Bank of India Act, 1934, for the introduction of one billion pieces each of Rs 10 and Rs 20 polymer banknotes for field trials and for the regular issuance of polymer banknotes in these two denominations following the successful completion of field trials.

“The government has approved this proposal. The RBI proposes to issue these polymer banknotes in addition to banknotes with paper substrates,” she said.

According to the RBI, the procurement process is now in its early phases, she stated. As a result, she highlighted that it would not be feasible to figure out a specific date for the introduction of polymer banknotes or the expected costs at this time.

In response to a different query, Sitharaman stated that the Consumer Price Index (CPI), which measures average retail inflation, has gradually decreased from 5.4 per cent in 2023–2024 to 4.6 per cent in 2024–2025 and then to 2.1 per cent in 2025–2026.

She asserted that retail inflation increased to 3.9 per cent in the first quarter of 2026–2027 due to the shock to commodity prices, high global energy prices resulting from the West Asia crisis, a seasonal increase in vegetable prices, and the anticipated unfavourable El Niño circumstances. It is still below the RBI’s 4 percent inflation objective, she added.

“A two-rate structure with a standard rate of 18 per cent, a merit rate of 5 per cent, and a special de-merit rate of 40 per cent for a limited number of goods and services (but including the previous compensation cess rate, so there is no increase in the overall tax burden) was introduced at the 56^th meeting of the Goods and Services Tax (GST) Council,” she added.

Furthermore, rates on various goods and services were rationalized as a result, going from 28 per cent to 18 per cent, from 18 per cent to 12 per cent or 5 per cent, and from 12 per cent to 5 per cent/nil.

Additionally, she stated that the government announced in Union Budget 2026-27 the rationalisation of Basic Customs Duty (BCD) on a variety of goods with effect from February 2, 2026, in order to lower input costs, increase domestic manufacturing, promote export competitiveness, and support strategic sectors.