The five-year benchmark corporate bond yield fell 1 basis point to 9.43 percent, while the 10-year bond closed unchanged at 9.30 percent on Tuesday.

Post Jan. 24 policy announcement, five-year corporate bond yields rose 5 basis points on cash shortfall in the system, while 10-year corporate bonds gained 4 basis points on dampened expectations of a rate cut, traders said.

The Reserve Bank of India injected 1.41 trillion rupees ($28.51 billion) into the banking system through its repo auction under liquidity adjustment facility on Tuesday, up from 1.22 trillion on Monday.

Banks borrowed 50 billion rupees from the RBI's marginal standing facility (MSF) on Monday, another indication of the tightness in the cash supply.

A 50 basis point cut in cash reserve ratio to 5.5 percent announced last week is estimated to have released around 320 billion rupees into the banking system on Saturday. CRR is the share of deposits banks must hold as cash with the central bank.

The central bank jump-started the open market operations after market hours on Tuesday to ease the cash strain after a week-long hiatus.

The RBI said it will buy up to 100 billion rupees of government bonds via open market operations on Friday.

Indian corporate credit issuance is expected to gradually recover this week after the central bank desisted from signaling any near-term cut in policy rates, dousing hopes that borrowing costs will decline soon.

The spread between the 10-year corporate bonds and government debt of the same maturity widened to 82.53 basis points from 81.24 basis points on Monday.

Total volume in the corporate bond market was 15.96 billion rupees, sharply lower than Monday's 20.97 billion rupees.