Home/ Money / Personal Finance/  What is a sweep-in facility and is it beneficial?

Aside from the regular investments that you allocate to different asset classes, every now and then, some surplus might accumulate in your savings account and just sit there unused. Many of us park this money in easy investment options like fixed deposits (FDs) for safekeeping. But there is also a way to give your bank standing instructions to put your surplus away, as and when it accumulates, in a sweep-in deposit.

What is it?

The “sweep-in" facility allows your bank to transfer any sum in excess of the amount stipulated by you from your savings account to a sweep-in deposit. The tenure of the deposit varies from one year to five years, and the interest rates also vary accordingly. But by and large, the amount transferred is likely to earn you a higher rate.

Different banks have different names for the facility. For instance, State Bank of India’s savings plus account basically serves the same purpose. Any excess amount in the savings account is automatically transferred to a sweep-in deposit in multiples of 1,000. HDFC Bank offers it as a sweep-in fixed deposit while ICICI Bank calls it a flexi deposit.

The only difference between a sweep-in facility and a flexi deposit is that in the former, the bank automatically opens the deposit to sweep surplus funds into, while in the latter, you will have to manually start the sweep-in deposit and link it to your savings account for surplus funds to be transferred into it.

Who is eligible?

The sweep-in facility is not offered to all bank customers. The criteria may vary from bank to bank. Typically, in order to be eligible for it, you have to open an FD of at least 25,000 with your bank.

Alternatively, you could open a premium account where the minimum balance on either a monthly or quarterly basis is in the range of 25,000 to 1 lakh.

Does it benefit you?

Aside from a better interest rate, another advantage the sweep-in facility offers is that it forms a separate corpus that you can dip into during emergencies, without touching your regular investments or having to liquidate FDs.

Also, it has no fees or penalties on withdrawal. Even if you dip into the deposit, the balance amount will continue to earn interest at the same rate.

While the sweep-in facility can help you make more off surplus funds, you should consider a few things before opting for it. The default term of the sweep-in deposit into which your surplus amount is transferred will vary based on what your bank offers, and so will the interest rate. In some cases, the sweep-in facility might offer only marginally better rates than your savings account.

The facility does work well for those who maintain substantial idle balance in their savings account. But do take into account if you are better off investing the surplus in other instruments that work better for your overall financial goals.

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Updated: 05 Feb 2020, 11:01 PM IST
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