The rupee plunged to a new 1-year low, as the RBI sounded hawkish in its latest minutes of Meeting released on Thursday.
The rupee was last seen trading at Rs 66.02 to the dollar, its lowest level since March 2017.
Sovereign Indian bonds also sold off of on Friday on unexpectedly hawkish central bank minutes. The worries were compounded by higher oil prices.
Minutes of RBI's meeting, which was held earlier this month and released on Friday showed most members of the monetary policy committee are optimistic that the economy will rebound this year with the output gap closing.
Interestingly, Deputy Governor Viral Acharya said he will shift decisively to vote for the start of the "withdrawal of accommodation" in the next meeting in June. This means a tilt to a likely interest rate hike, by the Deputy Governor.