What are varnished banknotes and why is RBI introducing them?
What's the story
The Reserve Bank of India (RBI) is planning to introduce varnished banknotes with enhanced security and durability features as cash circulation in the economy continues to remain strong. The move comes as part of the central bank's efforts to combat counterfeiting and ensure the integrity of India's currency system. The decision follows an internal survey that showed a continued strong preference for cash among individuals and small merchants, despite the rapid growth in digital payments.
Hygiene focus
Anti-microbial and anti-bacterial treatments
The upgraded banknotes will also come with anti-microbial and anti-bacterial treatments embedded into the currency paper. This is aimed at improving hygiene and durability, making the notes more resilient to wear and tear. The RBI has already begun trials for varnished banknotes at its Mysuru facility. These notes are coated with a thin protective layer, usually a transparent varnish, to make them last longer, resist dirt and moisture better, and make counterfeiting difficult.
Cost reduction
Cost of printing notes declines
Despite a rise in the circulation of banknotes, the RBI's currency printing expenditure has decreased significantly. The cost fell to ₹4,875.2 crore in FY26 from ₹6,372.8 crore in the previous fiscal year. This is mainly because the central bank reduced its indent for fresh notes from 3.03 lakh pieces to 2.81 lakh pieces, leading to lower operational costs as well.
Cash dominance
Cash still king in India
An internal RBI survey on payment behavior has reaffirmed the continued strong preference for cash among individuals and small merchants. This highlights the enduring role of physical currency in India's economy, despite the rapid growth of digital payments. The survey results further emphasize that cash remains a dominant form of transaction in India, especially among smaller businesses and individual consumers.