New Delhi, Nov. 20: After demonetising Rs 500 and Rs 1,000 notes, the government plans to circulate plastic or semi-plastic Rs 10 notes in place of the paper ones.
The secretive Bharatiya Reserve Bank Note Mudra Private Limited, a wholly owned subsidiary of the RBI, that prints notes has selected four entities - UK-based De La Rue, Australia's Innovia, Munich-based Giesecke & Devrient and Swiss company Landquart - to supply three kinds of plastic notes.
One type of notes is purely polymer, which is popular in Southeast Asia and Australia, and has now been introduced in the UK and Canada. The other two types are of composite nature - plastic-paper notes on plastic and paper-plastic notes on paper.
The RBI has floated a tender for one billion notes. The move is an experiment to try beat counterfeiters as well as increase the longevity of the notes, said top officials.
Paper notes do not last long and collect a host of germs in contrast to the polymer ones, which are washable and have more security features.
The pure plastic notes will be slimmer than the current Rs 2,000 paper notes, while the composite notes will be thicker and heavier than their paper counterpart.
The initial tender for pre-qualification issued to half a dozen global companies was brought out in April this year. The four companies were shortlisted after being cleared by the country's security agencies.
De La Rue already supplies paper notes to India but has been rattled by the controversy over the recent Panama leaks. It has recently been contracted to supply polymer note making technology to China and plans to make pure polymer notes for India too.
Australia's Innovia, which makes pure polymer or plastic notes based on a technology patented by the Australian Reserve Bank, has also offered to sell polymer notes.
Around 50 billion plastic notes are in circulation in 24 countries, including Australia, Singapore, Indonesia, the UK and Canada.
Giesecke & Devrient has offered to make plastic-paper on plastic notes, while Landquart will make paper-plastic on paper notes. However, composite notes are not yet very popular.
The government will decide whether to try all the four companies or go for one technology at a time.
The Reserve Bank and the finance ministry's coin and currency division have been considering polymer notes for some time, but have not been able to make up their mind over whether polymer notes popular in Australia should be brought in or the current paper notes should be continued, reinforced by other material.
The first big jolt which prompted the government to look at alternative notes was the release of fake new-series Rs 1,000 notes, which were considered almost impossible to duplicate.
Officials said they estimated about 7 per cent of all Rs 1,000 notes, which have now been taken off the market, were fake.
Experts realised that Pakistan not only set up its own currency factory in Islamabad but also bought the security features which India got from American and European suppliers, including the thread similar to the one used in all Indian notes.
Finance ministry officials, who attended the meetings held by the home secretary on the issue of fake currency, said Indian security agencies believed counterfeit notes were being pushed in from three regions - through Pakistan's border with Kashmir, from Nepal and through the porous Bangladesh border.
The Bangladesh route has reduced in significance after the crackdown of the Awami League government on terror and criminal groups in that country.
Officials said the pilot project was being launched as polymer notes were supposed to be more difficult to counterfeit, besides being more durable. The non-porous polymer notes have a a special protective coating that prevents absorption of moisture.
A report prepared by a joint venture floated by the Australian Reserve Bank says, "The ability to create transparent areas (or clear and complete windows) is a prime security feature", which makes it difficult for counterfeiters to fake these notes.
These windows "are visible in a range of lighting conditions" while another "optical feature changes colour when tilted under a light source". It also has embossing and shadow images like normal notes as security features.