Banks borrowed 1.66 trillion rupees from the RBI's repo counter under the liquidity adjustment facility -- its highest since Dec. 23, sharply higher from a combined 1.31 trillion rupees last Friday, the final day of the two-week reporting cycle, when repo auctions are conducted twice in the day.
The Reserve Bank of India said on Jan. 27 that it would conduct a second repo auction between 4:30 p.m. (1100GMT) and 5:00 p.m. (1130GMT) on all reporting Fridays.
"The liquidity deficit is not skewed and banks which are short of funds have excess securities with the central bank, so they are preferring the repo window for borrowing over call," a senior dealer with a foreign bank said.
The one-day cash rate closed at 8.80/8.90 percent, up from Friday's close of 8.50/60 percent for three-day loans. On Saturday, it closed at 8.80/85 in a less liquid market.
"Liquidity is tight due to service and excise tax payments earlier this week," a dealer with a state-run bank said.
A lack of government spending and preparations for next month's advance tax payments were also contributing to the liquidity stress, traders said.
A cut in the cash reserve ratio (CRR) for banks last month, however, is helping to rein in cash rates, traders said.
The 50-basis point CRR cut is estimated to have released around 320 billion rupees into the banking system on Jan. 28. The CRR is the share of deposits banks must hold as cash with the central bank.
Volume in the call money market was 160.25 billion rupees, compared with Friday's total of 115.85 billion, data from the Clearing Corporation of India showed.
In the collateralised borrowing and lending obligation (CBLO) market, volume was 349.58 billion rupees, compared with 213.26 billion rupees in the previous session.
The weighted average rate in the call money market inched up to 8.77 percent, from 8.76 percent previously.
In the CBLO market, the average rate was 8.57 percent, up from 7.90 percent.
In the inter-bank repo market, volume was 110.86 billion rupees, lower than 167.40 billion rupees on Friday.