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The Reserve Bank of India (RBI) may have left the policy rates unchanged in its policy review on Tuesday, but financial advisors are convinced that the reduction in Cash Reserve Ratio (CRR) clearly indicates it is only a matter of time before interest rates start coming down. Their advice to conservative debt investors is to lock-in their money at the available rates.

"Those looking to book FDs should lock-in their money without further delay as interest rates are only going to fall going forward. Also, they should consider longer tenure FDs over shorter maturities to eliminate reinvestment risk if they are saving up for a long-term goal. They should keep in mind the fact that the current rates may not be available when they want to renew the FD, say, a year later as interest rates would have climbed down further by then,"

"If you are a retired individual or investors in the lower tax brackets, you should consider investing in fixed deposits. However, for investors in higher tax brackets (such as 30%), debt funds are more tax efficient. For such investors, interest earned from fixed deposits is treated as income and taxed as per the applicable tax slab. Debt funds, on the other hand, are subjected to capital gains tax treatment,"

 The RBI has left the repo rate unchanged, though it reduced the Cash Reserve Ratio or CRR (the percentage of deposits banks must keep with RBI) by 0.25% to 4.25%. Banks take their cue from repo rate changes and often a repo rate cut is followed by cuts in deposit and lending rate. The reduction in CRR would inject around Rs 17,500 crore into the banking system and it is a move to pre-empt any potential threat to comfortable liquidity. However, the RBI policy statement clearly indicates the inflation continues to be a concern in the near term for the regulator. RBI has raised inflation target for the full year to 7.5% from 7.0%.

"The CRR cut of 25 basis points will definitely lower the interest rates in an indirect manner. For long term investments, investors can consider fixed deposits and bonds funds as the rates offered by these instruments are only going to be lower from this point,"  "The interest rates are expected to slide at a steady pace over two years. So if an investor can put away some money for at least two years, he or she can consider such investments,".