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Fixed Deposit Sweep in Facility

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Fixed Deposit Sweep-in is a facility that is provided by lenders (banks and Non-Banking Financial Companies) to their customers. To avail this facility, depositors should have a savings account that is linked to their fixed deposit account. A specific limit is set by the depositor. When the balance in the savings account goes beyond this limit, the balance is transferred to the linked fixed deposit account. The amount which gets transferred to FD earns higher returns (as per the prevailing FD interest rates) as compared to the normal savings account. For further information about FD sweep-in facility, read on.

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Updated: 13-12-2023 06:24:27 AM

Why FD Sweep-in?

Earning higher returns never hurts anyone and that is exactly the point of enabling a sweep-in facility. The amount getting transferred to the linked fixed deposit account will earn higher interest as the FD interest rates are higher than savings account interest rates.

Also, availing a sweep-in facility does not hamper the liquidity of the account holder because the limit is set by the account holder only. Therefore, they can set it as per their affordability. If someone needs Rs. 20,000 for monthly expenses, they can set the limit at Rs. 20,000 or Rs. 25,000 and the remaining amount will slide into the linked fixed deposit account. No extra effort is needed from the account holder’s side.

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How to Avail Sweep-in Facility?

To make use of this highly profitable facility, the following are the important points to keep in mind:

  • The foremost thing is to have one’s savings account linked with the fixed deposit account
  • The account holder is required to set a limit beyond which any excess in the savings account will be transferred automatically to the linked FD account
  • Doing it over the bank’s internet banking option is the easiest mode to opt
  • The same can be done by visiting the branch too
  • The account holder can opt for any specific FD tenure option provided by the bank

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How Does the Sweep-in Facility Work?

For better understanding, please refer to the following example:

Ms. Aditi has recently linked her savings account with a fixed deposit account for a 1-year tenure. She has opted for the sweep-in facility and has chosen a limit of Rs. 40,000 beyond which any amount will automatically be transferred to FD.

Her current balance is Rs. 25,000. She receives Rs. 30,000 as a cheque from her client that she encashes into her savings account. Now, the bank balance reaches Rs. 55,000 which is Rs. 15,000 above the limit she had set. Therefore, the bank automatically transfers the excess of Rs. 15,000 to her linked FD account.

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What is the Sweep-Out Facility?

To explain in layman terms, sweep-out is the exact opposite of sweep-in. This means that if there is a deficit in the savings account, the deficit amount is transferred from the linked fixed deposit account to the savings account to remedy the shortage.

However, some banks like the HDFC Bank terms this facility as Sweep-In. Thus, it is important to properly analyse the features that the bank is offering.

Useful Article: COVID Crisis: Keep your cash handy – Later invest in FD

Difference between Sweep-In Facility and Flexi Deposit

Both facilities of sweep-in and Flexi deposit provide the same benefit of higher interest rates combined with liquidity. Where the sweep-in facility is an added feature to fixed deposit schemes, Flexi-deposit is, in itself, a separate scheme.

In Flexi-deposit, the depositor is required to manually add money to their deposit account. Also, the depositor can withdraw funds from the account anytime, prematurely. Thus, both benefits of higher returns, as well as higher liquidity, are combined in a single deposit scheme.

 

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