Fixed deposits could earn you a high-interest rate when it is compared to a standard bank account. However, the challenge with Fixed deposits is that they do not offer the flexibility and liquidity as a savings account. This is when Sweep-in FDs come in handy.
A swep-in FD or fixed deposit sweep-in is a type of fixed deposit that allows investors to transfer excess funds from their savings account to an FD account automatically. Through this, one can earn higher interest rates on their savings and can still have access to their funds in case of an emergency.
After opting for a sweep-in FD, the investor will have to link their savings account to their FD account. Once the accounts are linked, the bank will automatically transfer any excess funds from the savings account to the fixed deposit account on a dail basis through sweep-in facility.
The period of the Sweep-in FD ranges from one to five years. This can again vary depending on the bank. Investors can state the amount that they would like to hold in their savings account and the current account, and the rest would be automatically transferred to the Sweep-in FD account.
The table below displays the major attributes of the Sweep-in FD:
|
Period of Investment |
The tenure of a sweep-in FD ranges from a year to 5 financial years. |
|
Bank Account Linking to Sweep-in FD Account |
The current or savings account should be linked to the sweep-in FD account. Also, the investor should have a bank account in the same bank as the FD. |
|
Minimum Investment |
Banks would usually transfer money from savings accounts to sweep in FD accounts in multiples of thousand rupees. |
|
Sweep in FD Interest Rates |
The interest rate for the sweep-in FD account would be similar to any normal FD and would also be dependent on the tenure of the investment. |
|
Withdrawals |
The excess amount in the fixed deposit through the sweep-in facility could be withdrawn without breaking the whole FD. Also, the bank will not charge any fees or penalties for the withdrawal of the swept-in money from the FD. |
|
Eligibility Criteria |
An investor who has invested Rs. 25,000 in an FD is eligible for the sweep-in facility. Alternatively, the investor who has a premium account with a minimum balance that ranges from Rs. 25,000 to Rs. 1,00,000 could opt for the sweep-in facility on their FDs. |
The simplest method of applying for the sweep-in facility is through the online procedure. Mentioned below is the step by step process to get it done:
Step 1: The very first step you would need to take is to log in to your net banking.
Step 2: Click on the option - 'FD Sweep-in.' You can find it under the FD tab.
Step 3: You need to click on the savings account number and the FD number that you would like to be linked for the sweep-in.
Step 4: Click on the options that say 'continue' and 'confirm' to have the facility activated.
There are various advantages of the Fixed Deposit Sweep-in, and they are mentioned below:
Sweep-In FDs and Flexi FDs both have the same advantage of high-interest rates and liquidity. A sweep-in feature is a feature that can be introduced to a conventional fixed deposit arrangement. A Flexi deposit, on the other hand, is a different deposit system in and of itself.
In a Flexi deposit arrangement, the investor must manually deposit funds into their fixed deposit account. They could also withdraw the money at any moment, i.e., ahead of schedule. As a result, a single plan can provide both high returns and liquidity, allowing investors to invest and withdraw at any moment.
Any extra funds in the savings or current account are automatically swept into the fixed deposit in a Flexi deposit program. When the depositor's threshold limit is achieved, the account holder is not needed to register a new FD account. Furthermore, there are no fees, charges, or penalties for violating the FD. Only the interest rate on the money removed from the sweep-in account is lost to the depositors.