Sweep-in Fixed Deposit: Meaning and How Does It Work?

Banks are reducing the savings account interest rates and fixed deposits does not offer liquidity as savings accounts. Depositors want both high returns and liquidity which is possible only with sweep-in FD. It offers maximised returns without sacrificing liquidity. Sweep-in FD offers a higher interest rate than a regular savings account. In this blog we will discuss Sweep-in FD in detail.

Quick Summary-

•  A Sweep-in FD links savings or current account to fixed deposit account.
• It ensures liquidity as funds are auto-debited back to the savings account when needed, without breaking the FD.
• Earns more interest than a regular savings account.
• Works on a threshold limit set by the account holder.
• No penalty on withdrawal; ideal for emergency fund management.

Meaning of Sweep-in FD 

Sweep-in FD is a facility offered in which a bank savings account / current account is linked to the fixed deposit. It allows account holders to use funds from the fixed deposit without breaking it. When the linked bank account falls short of funds it automatically sweeps funds from fixed deposit in the account. Most banks offer the two-way sweep-in where if there is a surplus in a savings account it automatically transfers funds from savings account to fixed deposit account. It ensures that funds are always available in the linked bank account for any emergency. These funds deposited in the savings account earn a higher interest rate offered to fixed deposits.

ALSO READ: https://stablemoney.in/blog/fixed-deposit-how-does-it-work

How Does the Sweep-in FD Work?

A fixed deposit account with a sweep-in facility works on the concept of transferring surplus funds to an FD account from a savings/current account. Conversely, if there is a shortage of funds, it is transferred back to the savings account from the Fixed deposit account. It functions on the basis of a predetermined threshold set by a depositor/investor, allowing them to avail high-yielding interest rates.

Let's understand how the sweep-in FD facility works with the help of an example. Suppose that you want to avail a sweep-in facility along with your regular FD, and you have set an account limit.

Let's consider that you have set 25,000 as a minimum FD amount in your bank account. You deposited an amount of ₹30,000. In this case, the bank will transfer the excess amount of ₹30,000 to your sweep-in FD

If you issued a Rs 15,000 cheque. However, there is only Rs.10,000 in the Savings Account. The bank will now withdraw the value of Rs.5,000 from the FD linked to your Savings Account and deposit it in your Savings Account. As a result, the cheque is accepted.

Sweep-in FD Features 

Get your start in sweep-in FD investments by going through some of its salient features.

Account Linking - 

One of the most common features of a Sweep-in FD is that such an FD account has to be linked with a depositor's savings/current account. Moreover, depositors need to open and link their savings/current account in the same bank from where they will avail of this FD facility.

Rate of Interest - 

The sweep-in FD interest rate will be applicable as per the prevailing regular FD interest rate. Under a sweep-in FD account, a depositor can invest surplus funds and generate higher returns on them than a savings account.

Tenure - 

The tenure of a sweep-in FD varies, depending upon the terms and conditions of different banks and financial institutions. However, it generally ranges between one year to 5 years. Depositors availing sweep-in facilities can choose a suitable tenure from the existing range, as per financial requirements.

Eligibility Criteria - 

A fixed deposit sweep-in account is only applicable to existing FD account holders who can maintain a certain balance as specified by the bank.

Easy Withdrawals - 

A sweep-in FD allows depositors/investors to easily withdraw the surplus funds from a savings/current account while maintaining the remaining FD balance. Moreover, such a type of FD does not impose any withdrawal penalty or fees upon depositors.

Advantages of Sweep-in FD

Here is a list of some common advantages you can avail of by investing in a sweep-in fixed deposit scheme.

Higher Interest: 

Excess funds in a savings account is automatically transferred to fixed deposit which results in earning higher interest rates offered on fixed deposits.

Automated Savings: 

It automatically manages your finances by transferring funds without any sort of manual intervention enabling your savings to earn more. 

Liquidity: 

Sweep-in FD makes sures that in emergency when funds are needed, they are available without breaking FD and incurring any interest or FD breaking charges. 

Seamless Transactions: 

Sweep-in FD makes sure that cheques are smoothly processed and without any hassle transaction is debited without any declined payment due to insufficient funds. 

Alternative to Overdraft Facility-

Sweep-in FD is a better alternative to overdraft/loan against FD facility, enabling depositors to manage their financial emergencies. Unlike an overdraft facility, this feature of an FD does not involve any additional cost.

Additional Benefits- 

Most banks in India provide additional benefits to depositors, such as flexibility to choose a suitable tenure and maturity of the sweep-in FD account.

How to Avail Sweep-in FD Facility?

Sweep-in facility can be availed both online and offline as per the convenience and suitability- 

Online

Here is a step-by-step guide on how to avail sweep-in facility online from a choice of your bank.

• Log in to the netbanking portal of your preferred bank.
• Find the ‘FD Sweep-in’ option under the Fixed Deposit tab and click on it.
• Enter the savings account number and the fixed deposit number that you want to link.
• Verify all the details carefully 
• Click on the ‘Continue’ tab to activate the sweep-in facility in your fixed deposit account.

Offline

Here is a how to apply for a sweep-in facility for your Fixed Deposit offline-

• Visit the nearest branch of your preferred bank.
• Ask a bank representative to link your FD with your savings/current account.
• Submit the required details, such as your savings or current account number, FD account number and your particulars.
• Specify a bank account limit for your sweep-in FD.
• Select a suitable term for your sweep-in FD.

The bank representative will activate the sweep-in facility in your fixed deposit account.  

How Does the Sweep-in Facility Benefit Depositors?

A depositor with a regular fixed deposit or savings account gets the interest rate on the particular account.  The sweep-in facility offers benefits of both account interest rates. 

Let’s take an example, a depositor has deposited an amount of 1 lakh in a savings account with 2.75% he will get 2750.

Now, if the depositor avails sweep-in facility  with a minimum balance of Rs 25,000. Keeping the minimum balance the access amount of 75000 will automatically get swept-in the fixed deposit.  He would earn an interest of 2.75% p.a. on his savings account and 6% on fixed deposit. 

With sweep-in facility, the interest earned would be in two parts:

• Interest on savings account - 25000 x 2.75% = Rs. 687.50
• Interest on Sweep-in FD- 75000 x 6% = Rs.4500

Total interest earned will be 5187.50 and an additional interest earned with sweep-in FD is 2437 

ALSO READ: https://stablemoney.in/blog/how-to-choose-the-right-fd-for-investment

Conclusion

A sweep-in fixed deposit is an ideal solution for those who want the best of both worlds higher returns of a fixed deposit and easy liquidity of a savings account. It ensures that your idle money doesn’t sit in a low-interest savings account and is instead put to better use by earning higher interest through automatic transfers. At the same time, in case of emergencies or regular transactions, funds can be accessed without any hassle. If you're someone who maintains a good balance in your account and often worries about maximizing returns without compromising on accessibility, a sweep-in FD could be the smart financial move you've been looking for.

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