India's banks rely on overnight borrowings to fund longer-term lending.
Indian bond yields may not spike if the government opts to increase spending when it unveils its annual budget in late February.
Earlier, India said the headline annual consumer price inflation accelerated to 5 per cent, compared with a 4.4 per cent print in November.
Eminent free market economist Arvind Panagariya has been appointed to run Indian Prime Minister Narendra Modi's new Policy Commission, set up to modernise economic strategy after decades of Soviet-style central planning.
The rupee had weakened by 23 paise to end at 63.51 against the American currency on Wednesday on month-end dollar demand from oil companies and persisting selling by foreign funds in stocks.
The rupee had gained five paise to close at 63.25 against the dollar in on Monday's trade on fresh selling of the US currency by exporters amid bullish stocks.
The rupee has posted its biggest single-day fall in more than four months to end at 62.95 against the dollar.
The RBI expects inflation in 2015 to hover around 6 per cent -- its target for January 2016 -- and sees risks to the target evenly balanced.
Rupee ends at 61.89 against the dollar, falls for second straight day.
The rupee had rebounded 15 paise to close at two-week high of 61.77 against the dollar at the Interbank Foreign Exchange on Friday.
The rupee had edged higher by four paise to end at 61.51 against the American currency in yesterday's trade on fresh selling of dollars by banks and exporters.
The dollar's weakness against other currencies overseas and a higher opening in the domestic equity market supported the rupee, forex dealers said.
The rupee had hit an intra-day low of 61.6750 on Friday, its lowest level since Oct. 17.
Traders are looking ahead at the consumer prices data due on Wednesday, amid rising expectation the Reserve Bank of India could opt for earlier-than-expected cuts in interest rates should inflation continue to ease.
The partially convertible rupee closed at 61.31/32 per dollar, unchanged from its Tuesday close.
The RBI's warnings signal its concern that unhedged firms could be a vulnerable link should global markets buckle.
In the offshore non-deliverable forwards, the one-month contract was at 61.58, while the three-month contract was at 62.18.
Forex dealers attributed the rupee's fall to increased demand for the US currency from importers and a lower opening in the domestic equity market.
Forex dealers said besides increased selling of the American currency by exporters and banks, the dollar's weakness against other currencies overseas also supported the rupee, but a lower opening in the domestic equity market limited the rise.