Money matters: Plastic's better than paper

NEW DELHI: If the prospect of a credit card swindle drives you nuts, here''s a different kind of plastic money for you: go, splurge at the downtown mall with some plastic currency. The government is planning to introduce, for the first time ever, plastic currency notes next year.
If the current plans of the Reserve Bank of India (RBI) and the finance ministry materialise, you will be forking out plastic notes of Rs 500 denomination everytime you pay your grocer, milkman or the doctor. Senior officials of RBI and the finance ministry are also in favour of printing thousand rupee notes, the largest denomination in circulation, on PVC film. And, if the experiment succeeds, more plastic currency — Rs 100 and Rs 50 — will reach your wallet.
The purpose of going PVC with your money is not to turn the Mahatma''s smile plastic but to curb the menace of fakes and make the moolah more durable. If plastic currency is introduced, the existing notes in the Rs 500, Rs 100 and Rs 50 denomination would be withdrawn from circulation over a period of four years.
Initially, the PVC film for the notes would be imported, as is the case with the special paper on which Indian rupees are printed. Officials feel that printing would also be initially done outside the country. Australia and New Zealand are among the few countries that use plastic currency now. Most of the other currencies of the world, including the mighty dollar, are printed on special paper.
The idea of introducing plastic currency notes was generated by a group of senior RBI officials trying to find ways to check fake currency. Two aspects led them to favour plastic currency. First it was found that a number of fake Rs 500 notes seized recently were printed on the same quality of paper as the real currency.
Secondly, it was found that many countries were procuring speciality paper from the same source as India and Pakistan was also among the buyers. Since the long-standing allegation of the government was that Pakistan''s ISI was pumping fake currency into India, it did not take time to put two and two together. Hence the decision to move away from currency printed on speciality paper since it was not helping in checking fakes.
The search for an alternative led to the idea of currency notes printed on PVC, highly-placed sources in the banking division of the finance ministry said. RBI’s view was that the economy would face turbulence if the fake currency menace was not contained, they added.
Since the idea has been accepted in principle, the finance ministry and the RBI are in the final stages of working out a detailed plan for introduction of currency notes printed on PVC film. Apart from helping in checking fakes, plastic currency would also help in cutting down costs since endurance is far higher. Also, they will be more suitable for the conditions in which most Indians carry their currency besides being water resistant.
While pursuing the plastic currency plan, senior officials came across the view that print-dies of the paper notes can easily be replicated to print fakes. In the case of plastic notes, the technology is available only with select countries, making it difficult to produce fakes.
The most worrying aspect of the entire episode is that detection of Rs 500 fakes has become difficult even for trained bankers or RBI staff. However, the government is unwilling to openly acknowledge this. Moreover, the volume of fakes in circulation is far higher than official estimates.
Officials feel that most of the fake Rs 500 notes are printed in Pakistan and smuggled into India through various places including Nepal. Hence, the ban on Rs 500 notes in Nepal though Indian currency of all other denominations is legal tender.