Sweep In Fixed Deposits

By Author: Ruby
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A Sweep-In Facility in Fixed Deposits (FDs) is a feature offered by some banks and financial institutions that allows you to automatically transfer surplus funds from your savings or current account into a fixed deposit account, also known as an FD. This facility is designed to help you maximize your savings by earning higher interest rates on your idle money without the need for manual intervention.

Here’s how a Sweep-In Facility in FDs works:

1. Linked Accounts: You typically have two linked accounts: a primary account (usually a savings or current account) and a secondary account (the FD account).

2. Threshold Balance: You set a threshold balance in your primary account. This is the minimum balance you want to maintain for your day-to-day expenses or liquidity needs.

3. Automatic Sweeping: When the balance in your primary account exceeds the threshold limit, the excess amount is automatically transferred or “swept” into the secondary FD account. This helps you earn a higher rate of interest on the surplus funds.

4. FD Tenure and Interest Rate: The money swept into the ...
... FD account is typically placed in a fixed deposit with a predetermined tenure and interest rate. The interest rate on FDs is generally higher than that of regular savings or current accounts.

5. Maturity and Access: When the FD matures, you have the option to renew it or withdraw the funds. In case you need access to the swept-in funds before the FD matures, you may have to break the FD prematurely, which can come with penalties or loss of some interest earnings, depending on the terms of the FD.

6. Benefits: The primary benefit of a Sweep-In Facility in FDs is that it allows you to earn higher interest on your idle funds while maintaining a specified minimum balance in your primary account. It’s a convenient way to ensure your money is working harder for you without requiring manual transfers.

7. Automatic Reverse Sweep: If the balance in your primary account falls below the threshold due to withdrawals or expenses, some banks offer an automatic reverse sweep feature. This means that funds are transferred from the FD account back into the primary account to maintain the specified balance.

Sweep-In Facilities in FDs are suitable for individuals and businesses looking to earn more interest on their surplus cash without constantly monitoring and managing their funds. However, it’s essential to review the terms and conditions, including FD interest rates, penalties for premature withdrawal, and any fees associated with the facility, with your bank before using this service.