What is Fixed Deposit Sweep-in Facility?

Understanding Fixed Deposit Sweep-in meaning and its benefits

Key Takeaways:

Sweep-in FD enables you to earn higher interest while enjoying liquidity.
You can make the best use of idle funds in your Savings or Current Account with the sweep-in facility.
You set a limit on your bank account deposits and automatically transfer excesss fund in the sweep-in FD Account.
You can easily apply for the sweep-in facility and enjoy various benefits.
Although similar, Flexi Deposit and Fixed Deposit sweep-in meanings differ.

A Savings or Current Account lets you fulfil your regular banking needs. It is a place where you can park your funds and make easy withdrawals with ATM cards and cheque books. Banks allow offer interest income on Savings Account deposits. If you wish to earn a higher interest rate, you can freeze your surplus savings in to a Fixed Deposit Account. Today, banks also offer a Sweep-in Fixed Deposit Facility. Let’s understand how FDs and this facilty works.

What is a Fixed Deposit?

A Fixed Deposit is a type of deposit in which you can lock away your excess funds and earn higher interest rates compared to those offered on Savings Accounts. It is a safe investment avenue which protects your capital while you earn periodic or cumulative interest. While FDs are traditionally created with lump sum amounts, today you can open sweep-in FDs with smaller amounts.

What is Fixed Deposit Sweep-in?

A Sweep-in FD facility allows to you transfer the excess funds in your Savings or Current Account to a Fixed Deposit Account. Transferring the surplus balance this way allows you to earn a higher rate of interest on your bank account deposits. You can opt for the sweep-in facility for tenures of one to five years, depending on your bank. With the Sweep-in facility, you can withdraw funds for emergencies, without any fees or penalties.

How does the Sweep-in FD Facility Work?

Almost all banks offer a sweep-in facility wherein you can link your bank account to a Fixed Deposit Account. They provide such convenience based on certain eligibility criteria. If you are eligible, you can set a limit on the amount maintained in your bank account and transfer the rest to FD.

Example:

Assume you have opted to maintain a balance of INR 40,000 in your bank account. In the next deposit, if your account balance is INR 50,000, there is a surplus of ₹INR 10,000. Per your instruction, the bank automatically transfers the remaining INR 10,000 into a Fixed Deposit Account, on which you would earn higher FD interest rates.

*For reference purposes only

Benefits of Sweep-in FD

Havings explained what is sweep-in FD, let us assses its various benefits.

Multiple Account Linking

You can link multiple bank accounts to your Fixed Deposit to transfer the excess funds and enjoy a higher interest rate. The only criterion is the Savings or Current Accounts and the Fixed Deposit Account should be held with the same bank.
Interest on FD rates

Fixed Deposit offers a higher interest rate than Savings Account. It locks in your funds and lets you earn returns at a pre-determined, higher rate of interest. When the amount from your bank account is transferred to FD via the sweep-in facility, you get to enjoy the high FD rates.
Hassle-free Withdrawals

If you opt for premature withdrawal on a regular FD during an emergency, you must pay a penalty. The fee is charged as a percentage of the interest rate. You need not worry about such charges when you withdraw funds transferred through the sweep-in FD facility.
Total Control

Banks give you the flexibility to choose the tenure for transferring funds in the sweep-in FD Account within a given range (usually, one to five years). You also have total control in deciding the amount transferrable to the sweep-in FD. The excess is transferred based on the limit you set.

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What is the FD Sweep-in Application Process?

You can apply for a sweep-in FD facility either online or offline. Both modes are convenient, but the online method offers maximum flexibility. You can use it to understand what is the Fixed Deposit sweep-in process in your bank and get through the procedure smoothly. If required, a bank representative will take you through the process. The only requirement is meeting the eligibility criteria of the minimum balance. Once this is fulfilled, you can link your bank account with the FD and activate the automatic transfer.

How does Sweep-in Fixed Deposit differ from Flexi Deposit?

A Sweep-in FD differs from a Flexi deposit in the following aspects:

Tenure

The typical tenure for Sweep-in FD ranges between one to five years. In the case of Flexi-Deposit, the period is seven days to 10 years. The duration may vary depending on the bank. But you enjoy the flexibility to adjust the tenure within the given range.
Deposit Type

Sweep-in FD is an added feature through which you can access higher FD rates on your bank account deposits. You need not open a separate account to avail the benefits of the sweep-in facility. Conversely, a Flexi Deposit is a separate Deposit Account in itself.
Deposit Method

With a Flexi-Deposit, you are required to deposit funds manually into the account. This is not the case with sweep-in FD Accounts as the excess amount is transferred automatically from Savings or Current Accounts. You only have to set a one-time instruction.

Final Note

Now that you know what is Fixed Deposit sweep-in, you can utilise the facility and earn higher returns on your surplus deposits. This facility allows you to enhance your interest income and maintain regular expenses simultaneously. The FD helps you lock away your surplus earnings by simply investing them for better but safer returns. Additionally, you can withdraw the sweep-in FD anytime you need, without worrying about paying penalties.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.