RBI May Need To Replenish Forex Reserves As Rupee Falls Further: Report
NDTV
The Reserve Bank of India may need to find ways to replenish its foreign exchange reserves, HDFC Bank Chief Economist Abheek Barua said.
The Reserve Bank of India may need to find ways to replenish its foreign exchange reserves such as encouraging non-resident Indians to deposit more funds, as it looks to stabilise a depreciating rupee, HDFC Bank Chief Economist Abheek Barua said.
The Indian currency has weakened 9.5 per cent so far this year, with the central bank defending the rupee via dollar sales that have depleted its forex reserves to $545 billion from the peak of $642 billion a year ago.
"The central bank should intervene to ensure that a falling currency does not eclipse India's fundamentals," Mr Barua wrote in a note this week.
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, he said.
