What is a Fixed Deposit Sweep-in?

  • Deposit
  • 25 Days ago

Written by - Shriram

If you have excess funds lying idle in your bank account, a sweep-in FD (Fixed Deposit) facility will allow you to invest those funds into an FD. You won't have to break your fixed deposit to access funds with a sweep-in deposit. You can also withdraw money to meet any short-term requirements without charges or penalties. The tenure of the deposit can range from one year to five years, and the interest rate will also change accordingly.

Shriram Finance offers FD schemes with an additional interest of 0.50% for senior citizens. With unique features like auto-renewal and auto-refund, you can quickly grow your investments without worrying about them.

The facility of a sweep-in FD is also called an auto sweep, and the sum transferred will help you earn a higher rate of return. Depending on what sort of account you hold in a bank or Non-Banking Financial Company (NBFC), you can specify the amount you want to sweep into a fixed deposit and link it to either a savings or a current account. Keep reading to understand how a sweep-in facility works.

What is an FD?

A fixed deposit is an investment scheme offered by banks and NBFCs to help you save and grow your money. To start an FD account, you must invest a lump sum of money for a fixed interest rate over time. Fixed deposits are a popular means of investment because they offer assured returns and are easy to withdraw in the case of an emergency.

In addition to getting assured returns in a fixed deposit, with Shriram, you can either start a cumulative or a non-cumulative fixed deposit and choose the payout term as per your convenience. You will also have the flexibility to choose the tenure for your investment. Use the Shriram fixed deposit calculator to know the exact interest you will get upon maturity of the deposit.

What is an FD sweep-in facility?

When you choose the sweep-in facility, the bank or NBFC breaks up units of the specified FD into units of Re. 1. By doing this, the financial institution ensures that funds are available in your sweep-in savings or current accounts linked to the FD. Thanks to this system, cheques and other debit transactions will not be impacted if there is a lack of funds in your account.

You can state the amount you want to hold in your savings/current account. Your savings/current account will automatically transfer the remaining amount to your sweep-in FD account. In this way, you earn higher returns on the surplus money and allow you to withdraw the funds from the FD in the case of an emergency. There will be no penalty if you want to withdraw a part of the sweep-in FD before its maturity.

Features and Benefits of a Sweep-in FD

Linking bank account to sweep-in FD account:
You need to have a savings or a current account to avail yourself of the sweep-in facility. Your savings or current account will then be linked to the sweep-in FD. You need to have an account in the same financial institution as the FD to avail of the sweep-in facility.

Minimum investment:
Although there is no minimum investment amount for a sweep-in deposit, you need to have at least Rs. 25,000 in the FD you want to link. The usual surplus money transferred from your savings account would be in multiples of Rs. 1,000. Some banks and NBFCs also allow transfers of Re. 1 to Rs. 1,000. However, the transfer will only happen with the account owner's permission. You can link more than one FD to your savings account. This, in turn, will ensure you can withdraw the amount easily.

Tenure:
You can start a sweep-in FD with a term ranging from one to five financial years. Several banks and NBFCs offer flexibility in selecting the deposit period, the payment and the maturity. The balance to be maintained in the savings or current accounts lies with the accounts' owner.

Interest rate:
The interest rate for the sweep-in FD is similar to that of a regular FD. The term of a fixed deposit does not impact or change the interest rate when compared. The interest earned on the excess amount through the sweep-in is the same as what you will get through an FD. However, you will get a higher interest rate than what is available through regular savings or a current account.

Withdrawals:
The amount invested in the FD through the sweep-in facility can be withdrawn without breaking the fixed deposit. This way, you will not lose out on interest earned on the FD. However, if you choose to withdraw any amount, you will lose the interest earned on the amount withdrawn. The banks or NBFCs will not charge any penalties for withdrawing the swept-in amount from the fixed deposit.

Difference between a Sweep-in FD and a Regular FD

A sweep-in fixed deposit is very similar to a regular FD. But, a few differences will help you understand how they differ and which would be better for you.
 
Feature Sweep-in FD Regular FD
Interest flexibility Can earn interest even after a portion of swept-in funds is withdrawn If the FD is broken, it stops earning interest
Tenure One to five years Seven days to ten years
Liquidity Can be easily withdrawn without penalties It can be easily withdrawn, but you may lose the interest amount due to penalties
Account linking Can link multiple accounts to a sweep-in FD Can link only one account to an FD

Eligibility:

Not everyone is allowed to invest in a sweep-in account. There is a specific criterion you need to fulfil to be able to use this facility.
 
  • You need to have an existing FD with a minimum of Rs. 25,000 to be able to opt for the sweep-in facility.
  • You need to have a savings or current account in the same bank or NBFC your fixed deposit is in.
  • Linking your account to the FD is required for the sweep-in facility.
  • The account owner will have to set the bank account limit as per their requirement.

Conclusion

The sweep-in facility is beneficial if you meet the eligibility criteria. It offers a great range of flexibility regarding withdrawals and investment period. All you need is a fixed deposit and a savings or current account. If you haven't yet opened an FD, you can start with Shriram and get interest rates up to 8.40% per annum, including extra interest for senior citizens up to 0.50% per annum.

FAQs

  1. What are the benefits of a sweep-in account?
One of the best benefits of having a sweep-in FD is that you can withdraw the swept-in amount whenever you need. No penalty will be charged for such an action.
 
  1. What is the interest rate on sweep-in FD?
The interest rate of a sweep-in FD is the same as what you earn on a regular fixed deposit. You can check the fixed deposit interest rates with the Shriram FD calculator to know the amount of interest you can earn upon maturity.
 
  1. What is the difference between sweep-in and liquidating a fixed deposit?
Liquidating a fixed deposit means withdrawing all the money from your deposit and closing it. Sweep-in deposit is a facility where you can transfer the surplus cash into your FD account to maximise your savings.
 
  1. How do sweep-in FD works?
When you apply for a sweep-in FD, you are given an option to set a fixed amount that will stay in your savings account. The surplus money left will be "swept in" to the FD linked to your savings account.
 
  1. How to cancel fixed deposit sweep-in?
To cancel your fixed deposit sweep-in, you must contact your bank or NBFC where the deposit exists.

Key Highlights:

  • Surplus funds in your savings account can be grown by investing in a sweep-in deposit.
  • With a sweep-in deposit, you can withdraw funds without breaking the FD.
  • You can also withdraw money without paying extra charges or penalties.
  • The tenure of the sweep-in deposit can range from one to five years.