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The Indian rupee is expected to decline on Wednesday as worries over the U.S. banking sector reappeared, prompting a slide in U.S. equities and boosting the U.S. dollar.

Non-deliverable forwards indicate the rupee will open at around 81.98-82.00 to the U.S. dollar compared with 81.9125 in the previous session.

The USD/INR will open with a "slight bid tone" but based on how the pair has been "it is doubtful" there will be a major follow-through, a spot trader said.

"For it (USD/INR) to catch a meaningful uptrend, there needs a sustained and significant deterioration in risk."

The S&P 500 Index declined by the most in over a month overnight, the dollar rose against its major peers and U.S. yields declined as a tumble in regional U.S. banks' shares reignited concerns over the banking sector.

First Republic Bank shares nosedived to a record low after the bank disclosed a $100 billion plunge in deposits. A source told Reuters the bank is considering asset sales.

"Bank stresses remained the barometer for risk sentiment on Tuesday, with price action across macro markets emblematic of a flight to quality assets," Morgan Stanley said in a daily note to clients.

The dollar index rose half a percent on Tuesday and safe-haven demand fuelled a near 20-basis point (bps) decline in the two-year U.S. yield.

The odds of a rate hike next week by the U.S. Federal Reserve dipped slightly, but the base case remained that of a 25-bps hike.

Data released on Tuesday added to the weak risk mood. U.S. consumer confidence dropped to a nine-month low in April, heightening the risk that the economy could fall into recession this year. The U.S. Richmond Fed manufacturing index slid to -10 in April, the fourth straight month of contraction.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.09; onshore one-month forward premium at 12 paise ** USD/INR NSE May futures settled on Tuesday at 82.07 ** USD/INR May forward premium at 13.5 paisa ** Dollar index at 101.81 ** Brent crude futures up 0.3% at $81 per barrel after falling more than 2% on Tue ** Ten-year U.S. note yield down to 3.4080% ** SGX Nifty nearest-month futures down 0.1% at 17,759 ** As per NSDL data, foreign investors sold a net $41 mln worth of Indian shares on Apr. 24

** NSDL data shows foreign investors sold a net $121.8 mln worth of Indian bonds on Apr. 24