Majority of banks typically prefer to cover most of their mandated reserve requirements in the first week of a reporting cycle as in order to reduce the exposure to a possible volatility later.
Three-day call rate was at 8.70/8.75 percent, higher from Thursday's close of 8.50/8.60 percent for one-day loans.
"Although there is some demand, market is comfortably placed with the cushion of the second repo counter now available. So no pressure on rates is likely," said a dealer with a large state-owned bank.
The Reserve Bank of India will conduct a second repo auction between 4:30 p.m. (1100GMT) and 5:00 p.m. (1130GMT) on every reserves reporting day, to help banks manage cash supply in a better way and which in turn lowers possibility of volatility in cash rates. It held first of such auctions on Feb. 10.
Banks borrowed 962.80 billion rupees ($19.61 billion) from the RBI's first repo auction under the liquidity adjustment facility on Friday, compared with 1.47 trillion rupees on Thursday.
Traders said cash rates could climb higher in March after companies pay advance tax around mid-March, pulling cash from banks.
But hopes that the RBI will reduce the cash reserve ratio further and continue with debt purchases via open market operations (OMOs) will keep call rates under control, traders said.
The RBI has offered to buy up to 120 billion rupees of government bonds through an OMO on Friday.
The central bank cut the CRR, or the share of deposits banks must hold with it, by 50 basis points in January. This is estimated to have released about 320 billion rupees into the banking system.
Volume in the call money market was 104.53 billion rupees, against a total of 174.77 billion rupees traded on Thursday, data from the Clearing Corp of India showed.
In the collateralised borrowing and lending obligation (CBLO) market, the volume was 126.80 billion rupees, compared with Thursday's total of 473.78 billion rupees.
In the CBLO market, the weighted average rate was 7.73 percent, down from 8.43 percent previously.