HDFC Bank chief economist Abheek Barua Barua said that the central bank may need to think of ways to boost its foreign exchange reserves in order to stabilize a depreciating rupee if the pool shrinks to near $500 billion in the coming months, and that the Reserve Bank of India is expected to find ways to replenish its foreign exchange reserves, such as encouraging non-resident Indians to deposit more funds. Barua wrote that the central bank should intervene to make sure that a falling currency does not surpass India's fundamentals. The Indian currency has weakened 9.5% 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. He said that while there is a chance that a depreciated currency will help in closing the trade gap, the damage to the capital account in terms of reduced confidence of investors will outweigh this benefit. The central bank may have to think of ways to bulk up its forex reserves in the future if the pool shrinks to around $500 billion in the coming months, according to Barua. More capital is needed at this stage to stabilise the rupee and enable the RBI to replenish its reserves chest, he said. In July, the RBI allowed foreigners to buy shorter term local debt in order to encourage more inflows, as well as to raise foreign currency non-resident deposits at higher costs. The measures have only helped marginally, according to analysts. It may be time for the central bank to prepare other options such as those in 2013 when the rupee came under pressure due to the U.S. Federal Reserve announcing plans to taper bond purchases. It may be time to think again of the taper tantrum playbook, subsidize forwards and get lumpy non-resident deposits in, Barua said. He said that NRIs are sensitive to India's robust fundamentals and could be persuaded to deposit their dollars in India at attractive rates. With inputs from Reuters.