You can earn a higher interest rate on fixed deposits as compared to any other bank account. However, the only challenge you might face with a fixed deposit is that you might not get the liquidity and flexibility of a savings account. This is where sweep-in fixed deposits come to the rescue. When you are running low on funds and need emergency funds in your savings account, the sweep-in feature ensures that your bank transfers a certain amount to your savings account from fixed deposits without leaving any effect on your fixed deposit interest rate.
What is a Fixed Deposit Sweep-In?
The fixed deposit sweep-in facility is a facility through which an investor can transfer maximum funds to their bank account through their fixed deposit account. Moreover, this feature allows the investor to gain higher returns. The sweep-in fixed deposit facility ranges from 1 to 5 years. However, this time range varies from bank to bank. Investors can state any amount they would like to hold in their savings and current account, and the leftover amount can automatically be transferred to their fixed deposit accounts through the sweep-in facility.
Investors can earn higher returns on their additional money. They can also withdraw money from their fixed deposit account when in need. However, they might have to pay a penalty for doing so.
Sweep in Facility - Procedure
Few banks can offer you the facility of opening a savings bank account and linking the same to your fixed deposit. However, other banks might provide you with the facility considering the overdrafts you have taken. The first procedure is preferable as you can have access to your savings or current bank account that does not ask for any minimum balance.
Moreover, if you’re facing a situation with insufficient bank balance in your account, your bank will transfer funds from your fixed deposit to your linked account as per your instructions. Based on the instructions you give to your bank, amounts ranging from ₹1 to thousand rupees can be transferred to your other account. Moreover, you will lose the interest only on the amount that has been transferred and not on the full deposit amount.
Fixed Deposit Sweep-In Components
Some of the major attributes of the sweep-in FD are:
Investment Period
The sweep-in FD tenure ranges from 1 year to 5 financial years. It is crucial that your savings or current account must be linked to the sweep-in FD account. Moreover, almost every bank insists that investors hold a bank account in the same bank where they need to access the sweep-in facility from fixed deposits.
Minimum Investment
Usually, banks transfer the additional money in the savings account to fixed deposit accounts in multiples of thousand rupees. But some banks also process transfers ranging from Rs. 1 to Rs. 1,000 based on the instructions given by the investor.
Fd Sweep-In Interest Rates
The interest rate applied on sweep-in FD accounts is the same as the interest rate applied on normal FD. However, the interest rate also depends on the investment tenure. The investor will earn the same interest amount on the amount transferred through the sweep-in facility as the FD. Moreover, it allows the investor to earn higher returns as compared to the savings account on the additional money.
Withdrawals of the Scheme
The surplus amount that has been transferred to the fixed deposit through the sweep-in facility can be easily withdrawn without breaking the FD. Investors do not lose any interest in doing so. Moreover, none of the banks charges any penalties or fees for withdrawing sweep-in money from the FD.
Eligibility Criteria
Not all investors can access the sweep-in facility. An investor who has invested around ₹25,000 in their FD is only eligible for this facility. Moreover, an investor holding a premium account with a balance ranging from ₹25,000 to ₹1,00,00 can access the sweep-in facility on their fixed deposit.
How Should You Apply For A Sweep-In Facility?
You can simply apply for the sweep-in facility online. Follow the step-by-step process mentioned below for the online procedure:
- Step one: Log in to your net banking and link your current or savings and FD with the online banking application of your bank
- Step two: Under the FD tab, click on the FD sweep-in option.
- Step three: Select your FD number and savings account number that you are willing to link for accessing the sweep-in facility.
- Step four: Click on the continue option and then click on the confirm option, and your facility will be activated.
Fixed Deposit Sweep-In Benefits
The multiple advantages that you can avail with the fixed deposit sweep-in are listed below:
- Anyone who has a current account and is an owner of a small business need not take an overdraft on their fixed deposit. They can simply activate the sweep-in FD account facility as it will prove beneficial for them.
- Through this scheme, investors can only withdraw the specific amount required instead of an overdraft, which is the amount you withdraw more than what is required.
- You will not lose any interest in the fixed deposit but only on the amount that you have transferred or withdrawn.
- Several banks give you the facility to link more than one fixed deposit to a sweep-in account.
- You do not have to pay any additional fees or charges to access fixed deposit sweeping as the bank levies charges in the case of overdraft facilities.
- The interest that you earn on a fixed deposit or sweep-in is higher as compared to your savings account.
Conclusion
The fixed deposit sweep-in facility is an amazing facility offered by the banks to FD investors. In the absence of required funds, they can transfer the desired amount from one account to the other without paying any fees or additional charges. One of the major benefits an investor avails from this feature is that they do not lose any interest on the entire fixed deposits but only on the amount they have transferred or withdrawn.