If you have more money in your savings account than you need for everyday living expenses, a bank’s auto-sweep facility can allow you to earn potentially higher interest on the surplus amount while still having access to the money.
Instead of waiting for excess money to get held in a savings account, an auto-sweep program would automatically transfer the surplus to a linked fixed deposit (FD) once the balance crosses a certain threshold.
In general, the facility works in two ways - sweep-out and sweep-in. If your savings balance is above the designated threshold and you need money that day, the excess amount can be put in an FD. If you later need money again and your savings balance is below the threshold, the required amount can then be moved back from the FD.
This allows customers to keep liquidity to pay for regular expenses and potentially obtain FD-level interest on surplus funds.
How does an auto-sweep facility work?
Suppose you have a savings account threshold of ₹25,000.
If your account balance increases to ₹65,000, the bank can automatically convert an additional ₹40,000 into a linked FD according to the rules.
The ₹25,000 threshold remains in your savings account and can be used for regular expenses.
Now suppose you spend ₹5,000 and you have ₹20,000 in your savings account. The bank may automatically transfer ₹5,000 from the linked FD into your savings account under a sweep-in facility.
The exact mechanism, minimum sweep amount and applicable multiples differ between the banks.
What is sweep-in and sweep-out?
The two terms describe the movement of money between your savings account and linked FD.
Sweep-out: More money above the allotted level is transferred to an FD from the savings account.
Sweep-in: When your savings balance is insufficient to meet a transaction, the required amount can be brought back from the linked FD.
If most of your money has been transferred into an FD and you later make a large UPI payment, withdraw cash from an ATM, or issue a cheque, the bank may automatically break or sweep back the required amount from the linked deposit.
The process is intended to eliminate the need for customers to manually close an FD when they need access to their money.
Which banks offer auto-sweep facilities?
Several other major Indian banks offer similar facilities, but they use different names and have different terms.
SBI offers the facility through its Savings Plus (MODS) account. HDFC Bank offers Sweep-out FD/Money Maximizer, while ICICI Bank offers Money Multiplier/Flexi Deposit.
Other banks such as Kotak Mahindra Bank, Axis Bank, Bank of India, IDFC FIRST Bank, Punjab National Bank and Bank of Baroda also provide similar facilities or variants.
But customers should not assume that all auto-sweep products work in the same way.
Thresholds, FD tenure, minimum sweep amounts, multiples, interest rates and premature-withdrawal rules can differ depending on the bank and account type.
How much more can you get in the way of interest?
We would like to imagine ₹50,000 sitting unused in a savings account for three months.
At the annual savings interest rate of about 2.5%–3%, this amount would generate approximately ₹310–₹375 over three months.
If that same money qualifies for an auto-sweep FD earning around 6%–6.5% annually, the interest could be approximately ₹750–₹810 over the same period.
The difference illustrates why auto-sweep facilities can be useful for customers who regularly have sizeable surplus balances.
But these figures are only illustrations. The actual interest depends on the bank's current rates, FD tenure, applicable interest calculation method, and account terms.
What happens when you suddenly need the money?
One of the main advantages of an auto-sweep facility is that you don’t have to manually create and close deposits every time you need to manually make and close deposits every time your cash requirement changes.
If your savings account balance is less than the required amount, the bank can automatically make the necessary investment from the linked FD.
This could happen when you:
- Make a UPI payment.
- Withdraw cash through an ATM.
- Make a debit-card transaction.
- Transfer money through net banking.
- Issue a cheque.
- Make another eligible payment from the account.
The exact process is different for each bank. Some facilities may have specific deposit multiples, while others may break an FD to meet the withdrawal requirement.
What is auto-sweep FD?
The facility would offer the customer with surplus cash several benefits.
And if there is a surplus of funds, they could get FD rates instead of typical savings account rates.
Easy access: Money can be swept back into the savings account when required.
Automatic management: The customer does not need to manually create an FD whenever their account balance increases.
Liquidity: A figure can be set out for regular spending in the savings account.
What are the drawbacks?
For everyone auto-sweep is not a good choice.
One major factor is premature withdrawal. If money is withdrawn from the linked FD before maturity, the bank’s rules could affect the interest earned.
Customers should also see if the bank requires minimum sweep multiples or other criteria.
The FD tenure can also vary. Some products may create deposits for a certain period rather than allow customers to choose any tenure available under regular FD products.
Tax is another consideration. Interest on fixed deposits is taxable according to applicable tax rules, and TDS can apply where the relevant conditions are met.
Who should consider an auto-sweep facility?
Auto-sweep can be particularly useful for people who consistently have a large surplus in their savings account but still want convenient access to their money.
For instance, someone who needs ₹25,000–₹50,000 to cover monthly expenses and regularly has much more than that in their account could consider setting an appropriate threshold.
Before activating the facility, customers should compare the bank's current savings and FD rates and understand the applicable conditions.
Things to check before activating auto-sweep. Savings account threshold. FD interest rate. Sweep multiples. FD tenure. The minimum amount required for a sweep. Sweep-in and sweep-out rules. Premature withdrawal conditions. Any charges applicable, if any. Tax and TDS treatment. Whether the facility is available for your specific account type.
And ultimately, a threshold leaves enough money in your savings account for normal expenses and actually puts excess money into the higher interest deposit.
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