PM meets RBI chief, key advisers on rupee issue

Chairman of Prime Minister's Economic Advisory Council (PMEAC) C Rangarajan was also present in the meeting.

"We met the Prime Minister. We had discussions on what actions can be taken (to arrest rupee fall). We also discussed about the overall situation of the economy," Rangarajan said.

The meeting comes a day after Subbarao indicated that the central bank could sell dollars directly to oil marketing companies (OMCs) to ease pressure on rupee. He also sounded positive on the possibility of government floating sovereign bond to deal with the balance of payment crisis.

The rupee which closed at 55.65 to a dollar yesterday, improved 27 paise at 55.37 today on fresh selling of dollars by banks and exporters.

The Indian currency has been declining continuously since March and touched a historic low of 56.38 to a dollar on Thursday during the intra-day trade.

Attributing the rupee depreciation to mismatch between the current account deficit (CAD) and capital flows in the country, Rangarajan said, in the short-term the RBI should intervene to "curb speculation" as market over-reacts to the situation.

In the medium-term, he added, the efforts should made to "reduce the CAD and should be pro-active in increasing the capital flows".

The Reserve Bank of India (RBI) has already taken steps like asking exporters to sell half the foreign currency in their accounts and increasing interest rates on NRI accounts. MORE