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Measures to stem the rupee's fall will be discussed when the finance ministry and the Reserve Bank of India (RBI) meet on Wednesday.
"Some more measures to stabilise the rupee (might be announced) soon," chief economic adviser Raghuram Rajan, who would be the RBI governor from September 5, told reporters here.
The rupee on Tuesday hit a new low of 61.81 against the dollar but rebounded to close at 60.81.
The sub-committee of Financial Stability and Development Council would meet in Mumbai on Wednesday to assess the impact of liquidity tightening steps taken by the central bank in recent weeks.
"We will meet shortly to discuss the current macro-economic situation and depreciation in the rupee. We will discuss what more measures can be taken to address the problem," a finance ministry official, who did not wish to be identified, told Business Standard.
The sub-committee also comprises market regulator Sebi, insurance watchdog Irda and interim pension regulator PFRDA.
The rupee has depreciated 12.2 per cent against the dollar this financial year due to both local and global factors. To make the rupee more expensive, the central bank had raised the marginal standing facility rate by 200 bps to 10.3 per cent while capping banks' borrowing from the liquidity adjustment facility.
Despite measures taken by the RBI, the currency has weakened further.
Finance Minister P Chidambram said in the Rajya Sabha that the decline in the rupee value against the dollar was due to a host of global and domestic factors. In a written reply, he said the government has taken a slew of steps to check forex volatility and is monitoring the situation.
According to market participants, RBI might lower the cap for banks' borrowing under liquidity adjustment facility further. A temporary hike in the cash reserve ratio could be another option. Cash reserve ratio is the proportion of deposits which banks need to park with RBI as cash.
The central bank is yet to use any monetary policy tool for tackling the exchange rate but RBI governor D Subbarao has indicated that if the long term rates increase as a result of the measures, then that is inevitable and part of the process.
Among other steps which could be contemplated by RBI are revising the export credit refinance rate and selling short term securities. Bank's borrowing from the facility has increased by Rs 27,000 crore from this facility since the July 15 liquidity measures. Banks avail these funds at the repo rate which is currently at 7.25 per cent. This rate could be aligned with the MSF rate. Generally, MSF rate has a mark up of a 100 basis points over the repo rate. However, now it has risen to 300 basis points.
