This marks the fourth consecutive day that the People's Bank of China has drained liquidity from the market.

On Tuesday, the central bank conducted 90 billion yuan in seven-day reverse repos, 70 billion yuan in 14-day reverse repos and 30 billion yuan in 28-day reverse repos.

A reverse repo is a process by which central banks purchase securities from banks with an agreement to sell them back in the future.

With 200 billion yuan worth of reverse repos maturing on Tuesday, the central bank effectively withdrew 10 billion yuan from the market.

Analysts said liquidity is expected to remain tight in the near term, as China will continue to keep a prudent monetary policy.

Due to the current cash-strapped condition, the benchmark overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one another as a key barometer of liquidity, rose for a 14th straight day.

On Tuesday's interbank market, Shibor edged up 0.4 basis point to 2.3 percent. The Shibor for seven-day loans increased 1.5 basis points to 2.481 percent. The Shibor for three-month loans rose 0.59 basis point to 3.02 percent.