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A Sweep In or auto sweep facility is a balance that’s in excess of the stipulated amount which is transferred into a fixed deposit for a tenure of 1 year. The amount transferred will earn you a higher rate of return. The sweep facility is a kind of fixed deposit, and it is linked to your savings account or current account depending on which account you hold with the bank. If the bank has the sweep facility, under your instructions you can specify the amount you want to sweep into a fixed deposit and link it to either the savings or current account. The other benefit of a sweep facility you can make withdrawal from such fixed deposits for any emergencies, without affecting your savings or even breaking the deposit amount, or even worrying about the interest since it will still continue to earn interest on the full fixed deposit amount.
Some banks offer you the facility to open a savings bank account and link the same to your fixed deposit, while some offer you the facility based on the overdrafts taken by you. In the latter process, is a better option since this gives you access to have an account like savings or current accounts that will not require you to have a minimum balance. If there is a situation wherein your account has an insufficient balance the bank as per your instruction will sweep funds from your fixed deposit into your account linked to it. The amounts can range from Rs. 1 to Rs. 1,000, depending on the instruction given to your bank, and interest lost will be on the amount that’s swept and not the full deposit amount.
There are many advantages of this facility, below are some them:
Any individual who runs a small business and has a current account need not take an overdraft on the fixed deposit held by them, setting up a sweep account will be more beneficial for them.
With this facility being available, you can now draw the exact amount you require and need, instead of like an overdraft where that is a stipulated amount to be draw which more often that not ends up being more than you need.
You don’t lose interest on the fixed deposit, you lose interest only on the amount drawn or swept.
There are no additional fees or charges that need to be paid like in the case of overdraft facilities that are levied by banks.
The interest earned as well, will be higher than a regular savings account. For example, if the money in a savings account earns you a rate of 4.8% per annum the same money swept into a fixed deposit will earn you almost double the 4.8% per annum.
Many banks even offer you the facility to link multiple fixed deposits to you sweep account.
Yes, you have to open a fixed deposit of at least Rs. 25, 000, or alternatively you could open a premium account wherein the minimum balance on either a monthly or quarterly basis is in the range of Rs. 25, 000 - Rs. 1, 00, 000.
With a Sweep In facility any excess amount get swept into a fixed deposit automatically. This amount can be anything from Rs. 1 and above the threshold limit and it also doesn’t require you to open a new fixed deposit for this purpose. A Flexi Deposit on the other hand requires you to manually need to book a fixed deposit and then link the same with your savings or current account.
For a more convenient and easy method of keep your surplus funds in a facility earning you a better interest rather that manually have to book it like in a Flexi deposit, one can use the Sweep In facility. With this facility there are no charges. penalties, or even fees for breaking the fixed deposit, you only lose interest rate on the amount taken out of the Sweep In account.