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Sweep In Fixed Deposit

Updated on: 20 Dec 2023 | 10 min read

A traditional investment instrument, Fixed Deposits offer assured returns over a fixed term. When you invest in an FD, you deposit a lump sum with a bank this deposit earns a fixed interest rate throughout the tenure. However, the catch here is that the amount you have deposited in an FD gets locked for the entire term.

Even if you need to withdraw a part of the amount before the FD matures, you will be charged a penalty and might lose out on the interest income for the entire amount.

Therefore, if you need to maintain a certain degree of flexibility over your FD, you can opt to invest in a sweep-in FD. Such FDs allow you to enjoy the interest rates of a regular FD with the flexibility and liquidity features of saving accounts. Curious to know more? Keep reading to learn about fixed deposit sweep-in meaning and its features in detail.

What is Fixed Deposit Sweep-in?

A fixed deposit sweep-in is a type of fixed deposit where a savings or a current account gets linked to your FD. You have to specify a minimum balance to be retained in your savings account, and any amount beyond this is swept into the FD with no extra hassle.

Hence, a sweep-in FD allows you to earn higher interest rates on your surplus money while maintaining minimum liquidity. If you run short of funds in your savings account, you can withdraw the same from the linked FD without attracting penalties.

Features of a Fixed Deposit Sweep-in Facility

Let’s look at the features of a sweep-in Fixed Deposit:

  • A savings or a current account must be linked to your sweep-in Fixed Deposit account. That is the account where the desired threshold balance is maintained before the surplus is swept into an FD account. All banks require you to have a savings/current account with them to open a sweep-in FD.
  • The interest rate you earn on a sweep-in FD is similar to that on a normal FD. This enables you to earn higher interest on your surplus compared to the interest it would have earned in your savings account. 
  • Most banks allow you to transfer money in multiples of Rs. 1000 into your sweep-in FDs. Certain banks do allow transfers in the range of Rs. 1 to Rs. 1000 and more. 
  • You can invest in a sweep-in FD only if you invest a specific minimum amount in the FD. Usually, this amount is fixed at Rs. 25000. Premium customers with a minimum balance between Rs 25000- Rs 100000 are also allowed to open a sweep-in FD account.
  • The tenure of a sweep-in FD is usually 1-5 years. 
  • You can withdraw the excess amount from the FD without any penalties. The entire FD is not broken, and you continue to earn the FD interest rate on the remaining amount.

How Does the Sweep-in Facility Work?

You need to have a bank account in the same bank and set the cut-off amount, beyond which all else gets transferred to the FD.

E.g. Let’s say your savings account balance is Rs. 35,000, and you set up a sweep-in FD with an instruction to maintain a minimum balance of Rs. 30000 in your savings account. After keeping the minimum of Rs. 30000, the remaining Rs. 5000 will be swept into the FD. Now, suppose you need to withdraw 32000 to pay rent. After deducting Rs. 30000 from your savings account, Rs. 2000 will be automatically drawn from the sweep-in FD.

How to Apply for a Sweep-in FD Facility?

Follow these steps to activate your Sweep in FD account:

  • Login to your net banking account.
  • Select the option labeled "FD Sweep-in" under the FD tab.
  • Select the savings account/current account number and the FD number you want to link for the sweep-in.
  • Select the tenure and the limit beyond which the surplus will be transferred to the FD
  • Click "Continue" and "Confirm" to activate the Sweep-in FD Facility

Is there any Eligibility for a Sweep-in Account?

To be eligible for the sweep-in facility, you must invest a minimum of Rs. 25000 in the FD. Additionally, premium account holders having a balance of Rs. 25000 – Rs. 100000  are also eligible for the sweep-in facility on their FDs.

What are the Advantages & Disadvantages of Investing in a Sweep-in FD?

Let’s look at some of the advantages and disadvantages of investing in a sweep-in FD:

 

Advantages

  • You can get higher interest rates applicable to fixed deposits and still enjoy the liquidity of a savings/current account over them.
  • The amount swept into the FD is highly liquid and can be used seamlessly for making payments, etc.
  • You can also link multiple FDs to one savings account. This feature enables you to maintain a high degree of liquidity.
  • There is no penalty for prematurely withdrawing from a sweep-in FD account. Nor do you have to pay any charges for the account.
  • You have the flexibility of choosing the tenure and the sweep-in amount.

 

Disadvantages

  • A sweep-in account is of little value if you want to discipline yourself financially. You can continue to make frequent withdrawals, which will reduce the interest that you earn. It is most apt for people with high account balances and fewer withdrawals.
  • Low income individuals can not opt for a sweep-in FD due to the eligibility criteria, especially the minimum balance cut-off point.

Final Thoughts

Sweep-in FDs give you the best of both worlds, where you can enjoy a higher interest rate of a fixed deposit and maintain high liquidity. It is a perfect instrument for those with medium to large amounts of liquid funds with limited withdrawal needs.

Moreover, these accounts are convenient to manage through internet banking, and there are no extra charges for maintaining them. You can convert your existing FD into a sweep-in FD with a few clicks. Just be aware of the pros and cons before you start investing!

FAQs

How is a sweep-in fixed deposit different from a Flexi deposit?

The primary difference is while in a sweep-in FD the surplus automatically gets transferred, in the case of a Flexi deposit you will have to add it manually.

Do I have to pay tax on the interest income from a sweep-in FD?

Yes, the interest income from a sweep-in FD is taxable per your income slab rate as per the Income-tax Act, 1961.

What is a Sweep-out facility?

A sweep-out facility is the reverse of a sweep-in, i.e.; if the balance in your linked savings or current account falls below the specified minimum, it is replenished by sweeping out the difference from the FD.

Can I link multiple FDs to one savings account?

Yes, you can link multiple fixed deposits to a single savings account.

Can I link multiple savings or current accounts to one FD?

No, you can link only one account to one FD.

Can anyone with an existing fixed deposit avail of the sweep-in facility?

Yes

Is it possible to link a Fixed Deposit to two different bank accounts for the Sweep-In?

No, you can link only on savings or current account for sweep in FD

Is it safe to use sweep accounts?

Yes, sweep accounts are same as they are monitored in the same way you other FDs are.

What is the minimum amount required to open a Sweep-in FD account?

The minimum amount required to open a Sweep-in FD is Rs.25,000.

Are both principal and interest amount of the FD invested in the Sweep-In facility?

No, only the principal amount of the FD are invested in the sweep-in facility.

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