Banks must adjust their reserve balances at the central bank on the 5th, 15th and 25th in order to meet the RRR, with the amount of the payment or refund dependent on changes in their customer deposit balances. An increase in deposits requires banks to add to their reserves.

The benchmark weighted-average seven-day bond repurchase rate fell 7.69 basis points to 2.8012 percent from 2.8781 percent at the close on Tuesday.

The 14-day repo rate fell to 3.2086 percent from 3.3270 percent, and the one-day repo rate was little changed at 2.2564 percent from 2.2563 percent.

Dealers said the ample liquidity was due to the injection from fiscal deposits and central bank purchase of foreign exchange inflows.

Meanwhile, the recent rally in the yuan has prompted corporates to increase their sales of dollars to the commercial banks, which typically pass them on to the central bank. Central bank purchases of forex increase expand the base money supply, increasing liquidity.

Market players expect the People's Bank of China (PBOC) could conduct a small net drain of funds through open market operations this week, but the impact on interbank rates will likely be minimal.

The PBOC injected a 97 billion yuan ($15.58 billion) into the market through reverse repos on Tuesday, against a net drain of 203 billion yuan scheduled this week through maturing bills, repos, and reverse repos.

That means any injection less than 106 billion at the PBOC's regular Thursday auction will cause a net drain for the week. The central bank has conducted net drains for three straight weeks, including a 40 billion yuan net drain last week.