"...it has been decided to give banks the freedom to offer interest rates on such (FCNR, NRE) deposits without any ceiling. The extant ceiling on NRO accounts shall continue," RBI said in a notification.
"These instructions will be valid up to November 30, 2013, subject to review," it said.
In a separate notification it said: "Banks are advised that with effect from fortnight beginning August 24, 2013, incremental FCNR (B) deposits as also NRE deposits with reference base date of July 26, 2013, and having maturity of three years and above, mobilised by banks will be exempt from maintenance of CRR and SLR."
The move will help in providing more foreign currency cash for banking operation.
These announcements were made by Finance Minister P Chidambaram earlier this week as one of the measures to stabilise rupee.
Cash Reserve Ratio (CRR) is the portion of total deposits of banks to be kept with RBI while Statutory Liquidity Ratio (SLR) is the portion of total deposit invested in government securities.
Currently, CRR requirement is 4 per cent and SLR is at 23 per cent.
At present, banks are required to include all Foreign Currency Non-Resident Bank [FCNR (B)] and Non-Resident (External) Rupee (NRE) deposit liabilities for maintenance of CRR and SLR, it said.
The notification further said, if a bank had a total FCNR (B) deposit base of say USD 100 as on the base date, and mobilises an incremental deposit of say USD 20, that portion of USD 20 which has a maturity of 3 years and above will not be part of total deposits and will qualify for CRR and SLR exemption.
The same principle will apply for calculation of NRE deposits for exemption from maintenance of CRR/SLR requirements, it said.
However, it said any transfer from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for such exemptions.
Further, advances extended in India against the incremental FCNR (B) or NRE deposits will also be excluded from computation of priority sector lending targets, it added.