For those who want the high interest rates of fixed deposits (FDs) but also need the flexibility of accessing funds like in a savings account, a Sweep-In FD can be an ideal option. This unique facility allows your excess savings account balance to automatically convert into an FD, ensuring you earn more without losing access to your money when needed.
How Sweep-In FD Works
A Sweep-In FD is a smart feature that combines the benefits of a fixed deposit and a savings account. Banks allow you to set a threshold limit for your savings account. Any balance above this limit is automatically transferred into a fixed deposit.
For example, if you set your threshold at ₹50,000, any amount above this in your savings account will be transferred to an FD. This FD earns the same interest rate as a regular fixed deposit. Importantly, you can withdraw funds from the Sweep-In FD anytime without breaking the entire deposit.
Key Features of Sweep-In FD
- Flexible Threshold:
The bank typically sets a default threshold for your account. However, you can customize it as per your financial needs. The amount exceeding this limit is swept into an FD. - High Interest Rates:
Sweep-In FDs offer the same interest rates as standard FDs, ranging from 5% to 7% depending on the bank and tenure. - Liquidity Like Savings Account:
You can withdraw funds instantly if your savings account balance falls short for any transaction. Banks follow the Last In First Out (LIFO) rule for withdrawals, meaning the most recent FD created will be liquidated first. - No Penalty on Partial Withdrawal:
Unlike traditional FDs, where breaking the deposit results in penalties, Sweep-In FDs allow partial withdrawals without penalties. - Minimum Transfer Limit:
Banks generally transfer funds in multiples of ₹1,000. However, some banks allow transfers as low as ₹1 based on customer instructions.
Interest Rates Offered by Banks
Interest rates for Sweep-In FDs depend on the bank and the tenure of the deposit. Here’s a snapshot of rates offered by leading banks:
| Bank | Interest Rate (%) |
|---|---|
| Axis Bank | 5.75 – 7.00 |
| SBI | 4.75 – 6.50 |
| HDFC Bank | 4.50 – 7.00 |
| ICICI Bank | 4.50 – 6.90 |
| Canara Bank | 5.50 – 6.70 |
| Bank of Baroda | 5.50 – 6.50 |
| PNB | 4.50 – 6.50 |
| IDFC First Bank | 4.50 – 7.00 |
| RBL Bank | 4.75 – 7.00 |
(Source: Groww)
How to Set Up a Sweep-In FD
- Choose Your Bank Account:
Ensure your savings account supports the Sweep-In FD facility. Most banks offer this feature as part of their premium or standard savings accounts. - Set the Threshold Limit:
Decide the minimum balance you want to keep in your savings account. Any amount above this will automatically move to an FD. - Select Tenure and Preferences:
Choose the tenure for the FD, typically ranging from 1 to 5 years. Some banks allow flexible tenures based on your requirements. - Activate the Feature:
Visit your bank’s branch or use online banking to activate the Sweep-In FD facility.
Why Sweep-In FD is a Smart Choice
- Earn More on Idle Money: The interest rate on savings accounts is typically 3.5% to 4%, while FDs offer 6% to 7%. Sweep-In FD ensures your idle money earns more.
- Emergency Fund Access: Unlike traditional FDs, where liquidity is restricted, Sweep-In FD lets you access your funds instantly.
- No Lock-In Hassle: Your money is not locked entirely, giving you flexibility and peace of mind.
Things to Keep in Mind
- Partial Withdrawal Interest: If you withdraw from the Sweep-In FD, you earn interest only for the days the funds were in the FD.
- Bank-Specific Rules: Each bank has its own rules for thresholds, tenure, and interest rates. Check details before activating the feature.
Sweep-In FDs are perfect for those seeking a balance between high returns and financial flexibility.
