RBI may need to find ways to reload forex reserves as Indian rupee falls further, says HDFC's chief economist

RBI may need to find ways to reload forex reserves as Indian rupee falls further, says HDFC's chief economist.

Reserve Bank of India (RBI) is expected to find ways to replenish its foreign exchange reserves. This might include encouraging non-resident Indians to deposit more funds in order to stabilize a depreciating rupee, Chief economist of HDFC Bank, Abheek Barua told Reuters.

Barua said that the apex bank may need to think of ways to bulk up its forex reserves, should the pool shrink to near USD 500 billion in the coming months.

The Indian currency has weakened 9.5 percent so far this year, with the central bank defending the rupee via dollar sales that have depleted its forex reserves to USD 545 billion from the peak of USD 642 billion a year ago.

According to a report published in Reuters, Baruah said that “While there might be some benefits of a depreciated currency in closing the trade gap, the damage to the capital account in terms of reduced confidence of investors will outweigh this benefit.”

It is to be noted that in July, the RBI had allowed banks to raise foreign currency non-resident deposits at higher costs and permitted foreign investors to buy shorter-term local debt as a way to encourage more inflows.

ALSO READ: Plan to introduce green roads in  national and state highways, says Rajeev Agarwal