China's central bank said that it injected short-term liquidity into unspecified "large commercial banks" via its Standing Lending Facility on Monday to ease the current cash squeeze.

The People's Bank of China (PBC), the central bank, said in a Weibo entry posted late Monday afternoon that it also plans to inject more short-term liquidity into the market via reverse repurchase (repo) agreements on Tuesday.

The PBC said financial institutions should strengthen their management of liquidity to ensure the stability of the money market before Spring Festival, which falls on January 31.

The PBC has refrained from using reverse repo agreements since December 24, when it reportedly offered 29 billion yuan ($4.79 billion) in fresh funding to curb soaring money market rates as banks sought cash to meet year-end requirements.

The interbank lending market has been challenged by limited liquidity since last week, with banks rushing to create cash reserves to meet market demand and hand over taxes and fees to the State treasury before Spring Festival.

The seven-day repurchase rate, the benchmark money market rate, gained 145 basis points and closed at 6.6 percent when trading ended Monday.

The Shanghai Interbank Offered Rate (Shibor), which measures the cost for banks in borrowing from each other, also rose Monday. The Shibor for seven-day yuan loans saw the largest surge, up by 155.3 basis points to 6.32 percent.

Li Bo, Shanghai-based chief investment consultant at GF Securities, said Monday that banks always need more cash before Spring Festival since they need to pay taxes and fees and to prepare for large cash withdrawals by customers.

"The tight liquidity problem will be eased as soon as the Spring Festival holidays are over," he said.

The interbank lending market saw a cash squeeze in late December, when the seven-day repo rate spiked to nearly 9 percent and the one-week Shibor soared to 8.84 percent on December 23.

Zhang Lei, a macroeconomic analyst with Minsheng Securities, told the Global Times Monday that the liquidity shortage eased in early January because the Ministry of Finance injected 1.45 trillion yuan into the market in late December.

"The Shibor and repo rates will bounce back since the Ministry of Finance won't offer fresh funding this time," Zhang said. "Also, an unusually high number of loans are maturing in early 2014, so the Shibor and repo rates will remain high."