Fixed Deposit(FD) Sweep-in

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.

Fixed Deposit (FD) Sweep-in Meaning

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.

How Does a Sweep-in FD Work?

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. 

Components of Fixed Deposit Sweep-in 

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The excess amount in the fixed deposit through the sweep-in facility could be withdrawn without breaking the whole FD.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.

How to Apply for a Sweep-in FD Facility?

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.

Benefits of Fixed Deposit Sweep-in

There are various advantages of the Fixed Deposit Sweep-in, and they are mentioned below:

  • An individual that runs a small business and has a current account would not have to take an overdraft against fixed deposit that is held by them, and setting up a sweep account would be more beneficial for them.
  • With this Scheme offered, investors can now draw the exact amount they need instead of an overdraft which is a stipulated amount to draw more than you need.
  • You will not lose your interest in the FD, and you will lose interest only on the sum that has been swept or drawn.
  • Various banks offer you the facility to link multiple FDs to a sweep account.
  • There will be no additional charges that you will be asked to pay, like in the case of overdraft facilities that are levied by the banks.
  • The interest that is earned as well would be higher than a regular savings account.

Difference Between a Sweep-in and Flexi Deposit

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.

Comparison of FD rates

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