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Fixed Deposit Sweep in Facility

Sweep-in is a facility provided by banking institutions, whereby a balance that is greater than the stipulated amount (threshold limit) is transferred to a fixed deposit. It is linked to a savings account or current account, depending on which account the individual holds with the bank. Some institutions refer to the sweep-facility as money multiplier or 2-in-1 account. It is important to note that sweep-in fixed deposits maintain the liquidity of a savings account. The yield on sweep-in fixed deposits is higher when compared with that of a savings account. To open a sweep-in FD, one can simply visit a bank branch or place a request through the company’s website (net banking).

Features and Benefits of Sweep-In Facility

Here is a look at some of the features and benefits of the sweep-in facility:

  • When a savings account or current account with sweep-in facility is linked to an FD, an individual can not only earn high interest, but also have the choice of liquidity.
  • The account-holder can define an upper limit for the amount he or she wants to keep in the savings account.
  • Each account will earn its own interest.
  • There are no additional fees or charges applicable.

Things to Know Before Availing Sweep in Facility

Following are some important points to keep in mind before availing the sweep-in facility:

  • Tenure: Auto-sweep accounts have a fixed tenure, which is generally one year. Some banks may levy a penalty for breaking the deposit before the end of the tenure. The penalty could be about 0.5% to 1% of the interest payable.
  • Threshold limit: Some financial institutions have a fixed threshold limit, which can be anywhere from Rs. 25,000 to Rs.1 lakh, while a few may give account-holders the option to set their own limit. Additionally, most banks require depositors to maintain a minimum average balance in their savings account.
  • Manner of withdrawals: The way in which money will move between savings deposit and fixed deposit is an important factor to be considered. It can be either on 'First in First Out (FIFO) basis’ or on 'Last in First Out (LIFO).
  • Multiples: Withdrawals can be made in different multiples. Some financial institutions keep it at Re. 1, while others may set it at Rs. 1,000 or Rs. 5,000. Lower the multiple, greater will be the individual’s savings.
  • Tax: The interest earned in a savings account and fixed deposit is tax-exempt up to Rs. 40,000 a year. For Senior Citizens, the same is Rs. 50,000.

How to Avail Sweep-in Facility?

An individual who wants to avail this facility must choose a savings account option that comes with the auto sweep-in facility. Once the balance in the savings account goes beyond the threshold limit, the money will be automatically transferred to a fixed deposit. It is important to note that the manner in which a sweep-in facility works will differ from bank to bank. Individuals are therefore advised to discuss the various terms and conditions with the respective banker before opting for this facility. Sweep-in fixed deposits are best-suited for risk-averse investors who are looking for higher interest, when compared with savings deposit account.

FAQs on Fixed Deposit Sweep In

What is sweep-out facility?

Under the sweep-out facility, when the savings account balance goes beyond a pre-decided threshold, the money (the amount above the threshold) is moved to a fixed deposit account. It offers a higher yield compared to a savings account, and at the same time, maintains the liquidity of a savings deposit.

How does sweep-in facility work in HDFC?

If one has opted for the sweep-in facility of HDFC Bank, the deposits get broken down in units of Re. 1, thereby minimizing interest loss. The sweep-in of funds from fixed deposits to saving/ current account are triggered on Last in First Out basis.

How to open sweep-in fixed deposit in HDFC?

To apply for the sweep-in facility with HDFC Bank, individuals can either place a request online through the bank’s website or head to the nearest branch office. In case one opts for the online route, he or she would have to log in to the net banking account of HDFC Bank and choose the option ‘Fixed Deposit Sweep-in’ under ‘Fixed Deposits’.

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