The RBI is making extra efforts to spur the country's corporates to more actively hedge their foreign exchange exposure, in order to fortify the country's defences against any risk of currency turmoil.
The efforts reflect the Reserve Bank of India's fear of becoming hostage to global developments, especially as the US Federal Reserve is widely expected to start raising interest rates this year, which could spark potential selling in emerging markets.
"Corporates are not hedging enough," said a senior policy maker aware of the central bank's thinking.
"Many things can go wrong when the US starts raising rates. RBI and the government can only improve fundamentals, but corporates need to increase their hedge ratios to be better prepared for any turmoil in the exchange rate."
As a result, the RBI is seeking to bring down the cost of currency protection by reducing its own dollar buying in forward markets, making it more affordable for companies to buy forward cover.
The RBI's dollar buying had pushed up the cost of hedging for companies to 10-12 per cent. The premium has now fallen to around 6 per cent, according to Reuters data.
The RBI has also told banks to regularly report quarterly data for corporate customers' positions, including estimates of unhedged foreign currency exposure.
The rupee's buoyancy over the past year had become a disincentive to hedge. And the RBI wants to prevent complacency developing in a country that is enjoying easing inflation, a narrowing current account deficit, and the leadership of a government intent on introducing ambitious economic reforms.
The rupee is Asia's best performing currency so far in 2015, with a nearly 2 per cent gain against the dollar, helped by net foreign inflows of $5.25 billion into debt and stocks after $42.37 billion in purchases last year.
"A BIT OF VOLATILITY"
Nonetheless, the RBI is keen to avoid a repeat of the turmoil seen in 2013, when fears about U.S. rate hikes led to the rupee's worst crisis in more than two decades.
India closely shepherds the rupee - which is convertible on the trade account, but only partially convertible on the capital account - while letting the markets determine trends.
The RBI has typically intervened to dampen excessive speculation, or to supply dollars on days when there is heavy demand from importers to meet payments.
With a weather eye on the Fed's intentions, the RBI has bought dollars aggressively, and foreign exchange reserves climbed to a record $322.14 billion this month.
But the lack of corporate hedging remains a weak point in India's currency market defences, according to central bankers.
RBI Deputy Governor HR Khan said in October the hedge ratio for overseas loans and foreign convertible debt had halved to around 15 per cent in July-August from the previous fiscal year.
In recent weeks, the spot rupee-dollar rate has fluctuated more on days of heavy volumes, according to traders, as the RBI has abstained from draining or supplying as many dollars as it has done in the past.
Some analysts interpreted that as a warning to companies to hedge more, and to foreign investors to refrain from playing off a stable spot rate to speculate in offshore forward markets.
"RBI will allow a bit of volatility in the rupee as it wants neither the corporates nor FIIs (foreign institutional investors) to believe that it will continue to protect the rupee in a tight range," said Samir Lodha, managing director at QuantArt Market Solutions, an advisory firm for companies.
Some corporate treasurers saw the RBI's efforts paying off.
"The various measures being taken by the RBI has certainly helped and the hedge books of companies are at much higher levels than what they were last year," said Mradul Dubey, head of treasury, Electrosteel Castings and Srikalahasthi Pipes Ltd.