Do you know about the Sweep-in Fixed Deposit facility?
19 December, 2022
Fixed Deposits can help you earn a high-interest rate. With a sweep-in Fixed Deposit facility, you have one less worry about having insufficient funds in your account for a transaction and no more embarrassment of cheques bouncing.
What is a Fixed Deposit sweep-in?
When you apply for the sweep-in facility, the bank breaks up units of the specified FD in units of ₹1. In doing this, it makes sure funds are available in your sweep-in Savings or Current Accounts, whichever is linked. With this, cheques or any other debit transaction from your account is not hindered due to a lack of sufficient funds in your Savings/Current Account. The facility is only available for resident Indians, HUFs, and private and public firms.
Some crucial points to keep in mind:
Some banks have a maximum/ minimum limit for the FDs which can have a sweep-in facility. For example, for HDFC Bank, FDs of amounts greater than or equal to ₹5 crore to less than ₹25 crore are not allowed for sweep-ins/sweep-outs.
Those customers looking to avail themselves of the sweep-in facility for large ticket FDs may not be able to do it online and may be directed to contact the bank branch.
How does a sweep-in facility work?
Let’s assume you have a sweep-in facility on your Savings Account which is linked to an FD for ₹10,000.
You issued a cheque for ₹7,000. But the balance in the Savings Account is only ₹2,000. Now the bank will deduct the balance of ₹5,000 from the FD linked to your Savings Account and draw the amount to transfer to your Savings Account. So, the cheque goes through.
How can you apply for the sweep-in facility?
The easiest way to apply for the sweep-in facility is - via NetBanking. Here is a step-by-step guide to activate the sweep-in facility for an HDFC Bank single account, for example.
Log in to your NetBanking.
Click on ‘Fixed Deposit Sweep-in’. You can find it under the Fixed Deposit tab.
You must pick the Savings Account number and the FD number that you want linked for the sweep-in.
Click on ‘continue’ and ‘confirm’ to activate the facility.
What are the benefits?
Enjoy higher FD rates : Here, you get to enjoy the high interest from the FD while still having the choice of liquidity when your Savings Account with sweep-in facility is linked to the FD. Using the FD interest calculator, you can - compute the estimated interest rate on your deposits, to make an informed decision.
Liquidity : It offers the best form of liquidity. Suppose you have an EMI coming up or a cheque to be disbursed, and you are running low on funds in your Savings Accounts which have been selected to be linked with an FD for the sweep-in facility. In that case, the bank will transfer or sweep funds into your Savings Account to rescue you from any embarrassment and a poor credit score.
Allows multiple deposits to be linked with Savings Account : To ensure you never run out of cash liquidity, you can link more than one deposit to the Savings Account for sweep-in. In that case, the bank follows the LIFO (Last in First out) rule: on the sweep-in being triggered, funds will be first transferred from the last deposit linked to the sweep-in facility to your Savings Account.
Flexibility : Banks are flexible in allowing you to select the period of this deposit, the maturity, and the payment. There might be a self-imposed limit on the balance maintained in the savings and current accounts. There might also be a minimum holding time for FDs, and anything less can cause the interest to be forfeited Some banks, like, HDFC Bank do not allow the sweep-in facility for investments in securities or IPOs.
Create your Fixed Deposit asset today! Click here to get started.
You can create your Fixed Deposit Asset today with an HDFC Bank Savings Account. New customers can create a Fixed Deposit by opening a new Savings Account. Existing HDFC Bank customers can create their Fixed Deposit by clicking here.
*Terms and Conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.