An auto sweep-in option of a bank refers to a facility where whenever funds in your savings or current account are running low for a purchase, transaction, or as per the need of a customer, the bank will transfer the deficit amount from your Fixed Deposit to your regular account without affecting your interest rate in your FD.
Simply, the auto-sweep facility is a combination of savings account and FD account and uses the funds lying in your savings account to generate higher returns in the form of interest.
In this facility, the average balance applicable to the savings account or current account needs to be maintained irrespective of the FD value.
What are the advantages of an auto sweep-in facility?
Auto sweep-in facility carries the benefit of both (savings account and fixed deposit account. Your savings account is linked to a fixed-deposit account and a monetary limit is defined. The advantage of transferring into an FD does not mean that the amount loses its liquidity.
Whenever the amount in the savings account crosses the defined limit, the excess money is transferred automatically into the fixed deposit. This way, your savings account balance can earn a higher rate of interest than it would have lying in the savings account.
As per the advantages mentioned by Kotak Mahindra Bank on its website, sweep-in facility gives a customer the flexibility of a savings bank account, and the lucrative interest rate of a fixed-deposit account. Salaried people who do not want to lock-in big amounts in FDs can use this facility. It is also a great way to keep earning interest on your surplus money without locking it into a rigid financial instrument.
Banks offer sweep-in facilities with different product names. For example HDFC Bank Saving Accounts offer on-demand sweep-in facility with SavingsMax account, Women’s saving account and Kids advantage account.
- SavingsMax account: If the balance in a SavingsMax account exceeds or reaches Rs 1,25,000, the amount above Rs 1,00,000 will be swept out into a FD.
- Women’s Savings Account: If the balance in this account exceeds or reaches Rs 1,00,000, the amount above Rs 75,000 will be swept out into a FD.
- Kids advantage account: In the event of the balance in this account exceeding or reaching Rs 35,000, the amount above Rs 25,000 will be swept out into a FD.
Similarly, State Bank of India has SBI Multi Option Deposit Scheme (MODS).
MODS are term deposits linked to the savings or current account (individual). Unlike normal term deposits which are fully liquidated anytime you need funds.
A customer can withdraw from a MODS account in multiples of Rs 1000 as per the need. The balance amount in the MODS account will continue to earn the term deposit rates applicable at time of initial deposit.
– Deposits are completely liquid and can be withdrawn in multiples of Rs. 1000, any number of times through cheque/ATMs/INB.
– Tenure of deposits for 1 to 5 years.
– TDS is applicable at a prevalent rate.
– Nomination facility is available.
In MODS, for auto sweep facility, the minimum threshold balance and minimum resultant balance should be Rs 35,000 and Rs 25,000 respectively.
It is to be noted that the above restriction on threshold limit will apply only for availing auto sweep facility and the individual standalone MOD can continue to be opened by the customers including e-MOD with a minimum of Rs 10,000 irrespective of the threshold level.
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