The RBI has been selling dollars to arrest declining rupee, which led to a decline in forex reserves from $426 billion in April to $400.10 billion at the end of August.
The RBI has sufficient foreign exchange reserve, the official said, adding the ministry is in touch with the central bank for timely market intervention.
However, the official said that the decline of the rupee is not secular as the Indian currency has strengthened against British Pound, Euro, Chinese Yua, and Japanese Yen.
The government, the official said, also has the option of tapping NRIs for raising foreign exchange but a decision in this regard would be taken after due consideration.
“There is no panic situation as most of the global currencies are facing the heat of strengthening the dollar. In fact, the rupee has strengthened against various other currencies,” the official said.
Earlier in 2013, when the rupee fell to Rs 67.85 to a dollar due to US Federal Reserve’s ‘taper tantrums’, the RBI came up with NRI bonds mobilising $26 billion through Foreign Currency Non-Resident Bank Account (FCNR-B) deposits. These bonds had a maturity period of 3 years.
Experts said raising forex through NRI bonds is not a preferred option as large outflow at the time of redemption could create a problem for external sector.
Current Account Deficit (CAD), which is the difference between inflow and outflow of foreign exchange, rose to $18 billion or 2.4% of GDP in April-June quarter on account of rising global crude oil prices.
Under the current circumstance, the official said, the only way to control CAD is to increase exports.