According to HDFC Bank chief economist Abheek Barua Barua Barua, the central bank may need to think of ways to boost its foreign exchange reserves if the pool shrinks to near $500 billion in the coming months, in order to be able 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 by 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 the damage to the capital account in terms of reduced confidence of investors will outweigh the benefits of having a depreciated currency in closing the trade gap. The central bank may need to think of ways to bulk up its forex reserves, if the pool shrinks to near $500 billion in the coming months, according to Barua. More capital is needed at this stage to stabilise the rupee and allow the RBI to replenish its reserves chest, he said. In July, the RBI allowed foreigners to buy short term local debt and allowed foreign investors to raise foreign currency non-resident deposits at higher costs, as a way to encourage more inflows. 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 about the taper tantrum playbook, subsidize forwards and get lumpy non-resident deposits in, according to Barua. 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.