This year's review of the monetary policy has to tackle the issue of continuous dollar inflows leading to a rise in the value of the rupee, which in turn is slowing export growth.

"There are several ways in which the Reserve Bank of India can deal with the problem," says a senior banker.

"One of them is to curb arbitrage inflows. Another is to create opportunities for using dollars abroad, thereby adding to dollar demand, Also, the central bank is seriously concerned about the unhedged foreign exchange positions of Indian corporates."

The RBI has cut interest rates on repatriable NRE deposits three times in the past year, and the current interest rate is capped at 25 basis points above the London inter-bank offered rate (Libor) or swap rates for the US dollar of corresponding maturity.

However, the NRE savings bank interest rate continues to be 3.5 per cent. Bankers point out that after the rate cut on NRE fixed deposits, the inflow into savings accounts has increased.

"Inflow into savings accounts has increased in the last few weeks. Also there is no lock-in period for the customers and also no penalty for early withdrawal of money, unlike a fixed deposit," says the head of a private bank.

Consequently, bankers expect a sharp reduction in the rate of interest on NRE savings bank accounts.

Bankers also want the savings bank rates for domestic accounts to be cut to 3 per cent, but they do not expect that to happen.

Simultaneously, export refinancing is expected to get a relook as the present scheme has become redundant with no refinance being taken at the current 6.5 per cent rate, which is much higher than the market rates.

A series of steps has been taken towards capital account convertibility to ensure higher use of dollar funds abroad without bringing in the proceeds to India.

As an extension of this, various measures are likely with the objective of promoting joint ventures and wholly owned subsidiaries abroad.

Sops are expected to promote tourism in restricted areas by relaxing funding norms.

Bankers also believe that the central bank's concern at the huge unhedged foreign exchange exposure may lead to moral suasion of banks and corporates so that forward dollars remain in demand and command a premium.

"For example," says a forex dealer at a state-owned bank, "banks could be asked to come out with a policy approved by their respective boards.

Alternatively, banks could ask borrowers to give them stop-loss instructions whereby if the rupee depreciates to some point, banks could take an automatic forward cover on behalf of the corporate."

So far as external commercial borrowings are concerned, the funds are brought into India and both the interest and principal part of the loan is swapped into rupees for use. This is adding to rupee liquidity.