If your bank account balance exceeds a set upper limit, a sweep-in FD (Fixed Deposit) facility may allow you to automatically transfer surplus funds into a fixed deposit to earn better interest than a regular savings account. Conversely, if the linked savings or current account balance falls below a specified limit, instead of manually breaking your fixed deposit, the sweep-in facility allows funds to be accessed from your FD.

The facility of a sweep-in FD is also called an auto sweep, and the surplus transferred to your FD will help you earn a better rate of return. Depending on what sort of account you have, you can specify the amount you want to sweep into a fixed deposit and link it to either a savings or a current account. Keep reading to understand how a sweep-in facility works.

What is an FD?

A fixed deposit is an investment scheme offered by banks and NBFCs to help you save and grow your money. To start an FD account, you must invest a lump sum of money for a fixed interest rate over time. Fixed deposits are a popular investment option because they offer predetermined returns over the chosen tenure and may allow premature withdrawal, subject to the institution’s policies and applicable penalties.

In addition to earning returns on a fixed deposit, you can either start a cumulative or a non-cumulative fixed deposit and choose the payout term as per your convenience. You will also have the flexibility to choose the tenure for your investment. Use the fixed deposit calculator to estimate the interest and maturity value of your deposit.

What is an FD sweep-in facility?

When you choose the sweep-in facility, the bank breaks up units of the specified FD. By doing this, the financial institution ensures that funds are available in your sweep-in savings or current accounts linked to the FD. Thanks to this system, cheques and other auto-debit transactions will not be impacted if there is a lack of funds in your account.

You can state the amount you want to hold in your savings/current account. Your savings/current account will automatically transfer the remaining amount to your sweep-in FD account. In this way, you earn returns on the surplus money and allow you to withdraw the funds from the FD in the case of an emergency. The sweep-in FDs may involve an interest rate reduction on the swept portion, but this may differ from one financial institution to another.

Features and Benefits of a Sweep-in FD

Linking bank account to sweep-in FD account:

You need to have a savings or a current account to avail yourself of the sweep-in facility. Your savings or current account will then be linked to the sweep-in FD. You need to have an account in the same financial institution as the FD to avail of the sweep-in facility.

Minimum investment:

In a sweep-in deposit facility, the minimum investment requirement may vary depending on the policies of the financial institution. To enable the linking facility, a fixed deposit may need to be maintained with the institution. Surplus funds transferred from a savings account are usually moved in specified multiples, which can differ across financial institutions based on their product terms and conditions.

Tenure:

You can start a sweep-in FD with a term ranging from one to five financial years. Several financial institutions offer flexibility in selecting the deposit period, the payment and the maturity. The balance to be maintained in the savings or current accounts lies with the account holder.

Interest rate:

The interest rate for the sweep-in FD is similar to that of a regular FD. The term of a fixed deposit does not impact or change the interest rate when compared. The interest earned on the excess amount through the sweep-in is the same as what you will get through an FD. However, you will get a better interest rate than what is available through regular savings or a current account.

Withdrawals:

The amount invested in the FD through the sweep-in facility can be withdrawn without breaking the fixed deposit. This way, you will not lose out on interest earned on the FD. However, if you choose to withdraw any amount, you will lose the interest earned on the amount withdrawn.

Difference between a Sweep-in FD and a Regular FD

A sweep-in fixed deposit is very similar to a regular FD. But, a few differences will help you understand how they differ and which would be better for you.

Not everyone is allowed to invest in a sweep-in account. There is a specific criterion you need to fulfil to be able to use this facility.

• You need to have an existing FD that meets the minimum deposit requirement specified by the financial institution.
• You need to have a savings or current account in the same bank where your fixed deposit is held.
• Linking your account to the FD is required for the sweep-in facility.
• The account owner will have to set the account limit as per their requirement.

Conclusion

The sweep-in facility can be useful for managing surplus funds while maintaining liquidity for everyday transactions. It offers flexibility by allowing access to funds while still earning FD interest on the remaining balance. All you need is a fixed deposit and a savings account with the same institution.

Key Highlights:

• Surplus funds in your savings account can be grown by investing in a sweep-in deposit.
• With a sweep-in deposit, you can withdraw funds without breaking the FD.

FAQs

1.What are the benefits of a sweep-in account?

One of the primary benefits of having a sweep-in FD is that funds can automatically move between the FD and savings/current account.

2.What is the interest rate on sweep-in FD?

The interest rate of a sweep-in FD is the same as what you earn on a regular fixed deposit applicable for the chosen tenure at the time of the booking.

3.What is the difference between sweep-in and liquidating a fixed deposit?

Liquidating a fixed deposit means withdrawing all the money from your deposit and closing it. Sweep-in deposit is a facility where funds automatically move from a savings/current account to an FD and vice versa.

4.How does sweep-in FD work?

A sweep-in FD is linked to your savings account. When your savings account balance falls below a set minimum, the required funds are automatically transferred from your linked FD to cover the shortfall. Conversely, when your balance exceeds a set maximum, the surplus is swept into an FD to earn better interest. The FD is broken into small units, so only the amount needed is transferred and the remaining FD balance continues earning interest.

5.How to cancel fixed deposit sweep-in?

To cancel your fixed deposit sweep-in, you must contact your bank where the deposit exists.