What is Fixed Deposit sweep-in facility & how does it work?

Sweep-in FD offers a strategic financial solution, blending the growth potential of Fixed Deposits with the accessibility of a Savings Account. It ensures your funds earn higher interest rates while maintaining sufficient balance for transactions. This facility safeguards against insufficient funds, automatically transferring money from your deposit to cover transactions, thus avoiding the discomfort of bounced cheques. With Sweep-in FD, manage your finances efficiently while enjoying the dual benefits of earning and liquidity.

Fixed Deposit sweep-in meaning

The Fixed Deposit (FD) sweep-in facility ensures your Savings Account never falls short by breaking FDs into ₹1 units for liquidity. This Fixed Deposit sweep-in means having adequate funds for cheques and transactions exclusive to resident Indians, HUFs, and firms. The sweep FD merges saving agility with FD returns seamlessly.

How does a sweep-in FD work?

Let's understand the working of sweep-in FD with an example.

If your Savings Account holds ₹50,000 and you've designated ₹25,000 as your threshold, any excess amount will be swept into your Fixed Deposit (FD) automatically. This feature transfers funds in increments of Rs 5000 to the FD whenever the savings account balance exceeds Rs 25,000. Conversely, when the balance in the Savings Account drops below Rs 25,000, the same amount is automatically transferred back from the most recently created FD, in units of Rs 5000, to the savings account.

Key terms to note here:

Linkage: Your Savings Account is linked to an FD.
Threshold: You set a limit in the Savings Account.
Transfer: If the balance exceeds the limit, the excess is swept into the FD.
Liquidity: When funds are needed, the FD is broken down into units (for example in units of Rs 5000) to cover the shortfall.
Optimisation: This ensures optimal interest earning from the FD while maintaining liquidity.

Benefits of a sweep-in FD

The benefits of a sweep-in FD are numerous and cater to maximising your earnings while providing financial flexibility.

Higher interest earnings: Funds in excess of the Savings Account threshold automatically earn higher interest rates, which is typical of Fixed Deposits.
Automated savings optimisation: The FD sweep-in automatically manages your finances, transferring surplus savings to earn more without manual intervention.
Flexibility and liquidity: Sweep FD ensures funds are available when needed, breaking the FD into small units to cover specific transactions and combining the liquidity of savings with the returns of an FD.
Avoidance of overdraft fees: Prevents overdraft fees by maintaining the necessary balance in the Savings Account through automatic transfers.
Ease of setting up: Setting up a sweep-in FD is usually straightforward and can be done through internet banking, mobile apps, or in-branch, making it a user-friendly option.
Seamless transactions: Ensures smooth processing of cheques and debit transactions without the hassle of declined payments or insufficient funds.
Encourages financial discipline: The sweep-in FD facility encourages a disciplined approach to saving and investing.

How can you apply for the sweep-in facility?

To initiate a sweep-in FD arrangement, please follow the process outlined below:

Step 1: Commence by securely logging into your net banking dashboard, using your authorised credentials to ensure a protected session.

Step 2: Within the net banking interface, locate and select the 'Fixed Deposit' section. Here, you will find an option labelled 'FD sweep-in'—choose this to proceed.

Step 3: The subsequent step requires you to provide details of your Savings Account as well as the Fixed Deposit account that you desire to link with the sweep-in facility.

Step 4: After entering the necessary details, you will be prompted to verify the information. Ensure accuracy before proceeding to the next step, which involves clicking 'continue'.

Step 5: Lastly, a confirmation page will appear, where you must click 'confirm' to officially activate the sweep-in FD service on your account.

This process is designed to facilitate seamless integration of your accounts, enabling the automatic management of your funds with the sweep-in feature.

Components of Fixed Deposit sweep-in

Key components of a sweep-in Fixed Deposit:

Investment duration: The tenure for a sweep-in FD at Axis Bank can range from one to five financial years, with the option for short-term investments with a minimum duration of six months.
Account association: Axis Bank’s auto Fixed Deposit feature requires linking a Savings Account to the FD account, ensuring both are maintained within the same financial institution for seamless transactions.
Initial deposit requirement: The auto Fixed Deposit service streamlines your savings by automatically transferring surplus funds in multiples of ₹5,000 from your Savings Account to the FD once the balance exceeds ₹25,000.
Interest yield: Competitive interest rates akin to traditional Fixed Deposits apply to the sweep-in FD, with the rate dependent on the length of the investment period.
Liquidity and access: Partial withdrawals from the sweep-in FD are allowed, providing flexibility to access funds as needed without dismantling the entire deposit, typically free of charge.

Also Read: 7 Different types of fixed deposit in banking

Conclusion

The sweep-in facility stands out as an efficient mechanism for optimising your financial assets, bridging the gap between your savings and investment needs. It not only ensures that your surplus funds are fruitfully employed but also retains the flexibility of your cash flow. If you're looking to enhance your financial growth without sacrificing accessibility, the Auto Fixed Deposit from Axis Bank is a strategic choice to consider for boosting your overall financial health.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.