With rupee continuing to be weak against the dollar, an NRI bonds issue may become imminent soon to contain its free-fall that has already impacted the Indian economy, HSBC country head Naina Lal Kidwai said.
Government has used NRI bond issue as a tool to stem rupee fall only on three occasions in the past-- in 1991, 1998 and then in 2001.
"I think it's a weapon and tool which government must keep it in its hand ... we are a stage that where it could be required. We stemmed the rupee falling for the moment. All emerging market currencies have been depreciating because the dollar strengthening and we have to be ready for it," Kidwai, who is also president of industry body Ficci, told PTI in an interview.
"Government has used it in past and knows what works and what does not," she added.
In order to raise foreign exchange to deal with the external sector problems, India raised funds through India Development Bonds in 1991, Resurgent India Bonds in 1998 and India Millennium Deposits in 2001.
Banks had raised USD 1.6 billion, USD 4.8 billion and USD 5.5 billion respectively from the bonds targeted at the diaspora.
According to estimates, India can mop-up USD 20 billion from NRI bonds.
The rupee has depreciated by over 12 per cent against the dollar since the beginning of the fiscal. The Indian currency hit a lifetime low of Rs 61.21 a dollar on July 8, forcing the central bank and capital markets regulator Sebi to take unconventional measures to arrest the slide.
Terming high current account deficit (CAD) a problem, Kidwai said: "I think imports we have done a lot on gold. We need to make sure tightening up on gold we don't mess up gold jewellery makers because they are complaining that they cannot access gold. So they have problem with exports."
It is not good, she said, adding, "everything that value adds and exported and earns foreign exchange is good for us. So we need to resolve their problem but curbs on gold have really paid off."
On the revenue side, she said, "we need to increase exports in the long run and in the near term you can understand why government has to encourage FDI and FII. Because actually there is no other solution."
CAD, which is the difference between the outflow and inflow of foreign currency, hit a record high of 4.7 per cent in 2012-13.