SHANGHAI - People's Bank of China Tuesday drained 2 billion yuan ($326 million) from the money market despite banks' reported call for cash injection, suggesting regulators are keen to keep liquidity tight amid growing jitters of China's financial risks.

The 2-billion 91-day bills, though tiny by amount, were viewed as the central bank's commitment to squeezing out excessive funding.

Shanghai Interbank Offered Rate (SHIBOR) overnight rate rose 78.30 base points to 5.596 percent as of 11:30 a.m., Tuesday.

Traders in the interbank market said the cash crunch would continue for the next few weeks.

Foreign capital inflows are dwindling and a huge amount of wealth management products sold by banks are due at the end of June, according to a report of Guotai Junan Securities.

Wall Street Journal Tuesday quoted a senior executive at one of China's big four banks that they were hoping for an reserve-requirement ratio cut by the end of Wednesday.

Borrowing costs between Chinese banks soared last week with SHIBOR overnight rate shooting up to 9 percent.

UBS said the spike in rates may have been caused by a significant drop in foreign exchange inflows, under-estimated holiday and unseasonal liquidity demand, and market's misperception of the central bank's policy intention.

"The PBoC has made it clear in the past 10 days that overly-rapid credit expansion would not be accommodated and banks may have to scale down their credit growth plans and manage their own liquidity more prudently," said Wang Tao, chief China economist at UBS.

Total social financing, a gauge of China's credit expansion, surged 52.08 percent during the first five months than the same period last year.Analysts said much of the funding stayed "circulating" in the financial system instead of propping up the real economy.

While liquidity is abundant, UBS warned accidents could happen in the process of changing liquidity provision or cleaning up interbank activities.

"Therefore, the central bank and other regulators must tread very carefully in the coming months in managing the process to try to minimize the risk of unexpected break in the liquidity chain or unwanted credit crunch," Wang said.