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Do you have a Bank Account? Off-course you do! How much money do you have in your account? 5,000? 20,000? or a few lacs? If you have a lot of cash, lying idle in your Bank Account, and at the same time you don’t want to commit to long-term investment, you need to enable the Auto-Sweep facility in your Savings Bank account. This will make sure you earn good interest on a major part on the cash lying in your Savings account.
What is Auto-Sweep Account ?
“Auto Sweep” is a facility which provides, the combined benefits of a Savings Bank account and Fixed Deposits. Auto-Sweep facility interlinks your saving bank account with a Deposit account and makes sure any extra amount lying in your bank account above a threshold limit is automatically transferred to Fixed deposits and you earn better interest on your money.
How ‘Auto Sweep’ works?
This is how Auto-Sweep works. You define a “threshold limit”, and money up to that limit will be in the form of cash in your savings account and any amount above this, “limit” will
HDFC Bank calls it “Sweep-In” account . But as this is above his “threshold limit”. This way he always has 30.000.5% interest on this money. However on the other hand if he wants to withdraw Rs 50. which is almost 100% more than the first case .000.000. as his account balance will be just 30. an additional Rs 20. You can earn some extra returns if you just enable auto-sweep on your saving account . Opportunity cost A lot of us don’t bother about how much idle money is lying in our account and for how long. and his balance will reduce to 20.000. So find out if your bank provides the facility. which is Rs 3. He will be earning normal 3-3. the money lying in the Fixed Deposits is Reversed-sweeped into your savings account and you can withdraw the amount you wish. not just 1 lac. the extra amount of 40. Now suppose he has Rs 10. Example: Ajay opens a new Savings Bank account with SBI. and SBI calls it “Saving Plus. At any point in time. After that if he deposits Rs 60.100 .000 will actually be in form of a fixed deposit and it will earn an interest of 8% (assumption).400 .000 in his account.” . the money keeps lying in the bank for months and months and sometimes even years.000 which turns out to be Rs 700 and 8% of 80. you will earn 3. then in that case. he will actually withdraw it from the cash lying in saving bank ..000 from his account. He enables Auto-Sweep facility on his savings bank account and defines the threshold limit of Rs 30. Suppose your account has Rs 1 lac for 1 year. so lets not commit to any investment.000 . just do it.automatically be converted into a Fixed Deposit and you will start earning normal FD returns on that part of the money. A lot of people have much more than 1 lac in their accounts.000 .5% of 20.000 . and he has 40. ICICI Bank calls it ”Auto Sweep” . Now suppose he has to withdraw 10. Here is a list of other banks and the name by which they call this Auto-Sweep facility (thanks for Gopal Gidwani for the info) • • IDBI Bank – Sweep-in Savings Account Axis Bank – Encash 24 . a total of 7. the additional 80. it will earn 3. and get it right away! Also note that different banks have different names for this facility. In this.5% interest on it.000 lying in the bank.” But then.000 in his account for his daily requirements.500 for a year. if you need money more than is lying in your bank account.000 which is Rs 6. However if you have auto-sweep enabled in your savings account with threshold limit of Rs 20. For eg.000 converted into Fixed deposits which again is available to him incase he requires it. his total balance would be 70. This happens because we think “I might need it soon.000 will be auto-reversed from his Fixed Deposit and he can withdraw total 50.000 will be converted into a fixed deposit automatically and start earning returns equal to normal Fixed deposits with SBI (for example 8%).
5% . Don’t over do it While Auto-sweep is a wonderful thing for salaried class people who want to maintain liquidity. . still better than 3. but some banks charge a penalty if the FD under auto-sweep accounts are broken before some duration like 1 yr and 1 day . you will at least get 7%. better to use the normal Fixed deposit or Debt funds. The way auto-sweep works. Some banks are also known to give simple interest on the Auto-sweep Fixed Deposits and not compound interest as in case of normal fixed deposits .• • • • • • • • • Union Bank – Union Flexi Deposit HDFC Bank – Super Saver Facility Bank of India – BOI Savings Plus Scheme Oriental Bank of Commerce – Flexi Fixed Deposit Scheme State Bank of India – Multi Option Deposit Scheme Allahabad Bank – Flexi-fix Deposit Bank of Maharashtra – Mixie Deposit Scheme Corporation Bank – Money Flex United Bank of India – United Bonanza Savings Scheme Disadvantages of Auto-Sweep Account Auto-Sweep has some disadvantages too. one should not over do it. as well as want to earn more interest on their unused money. then you can enable autosweep facility and set threshold limit as 2-3 months of expenses. it makes it an ideal place to park emergency funds . Only if you are unsure of your money lying in bank and when you might need it. you should be using Auto-Sweep facility. If not 8% . In general the interest rates of normal fixed deposit and FDs under Auto-Sweep are same. If you are very sure that the money lying in your account will really not be used for long. so that rest of the money can earn a better interest. So if you have kept 6 months of expenses as your emergency fund in Saving Bank. But I think that’s fine.
000) for a year your flexi deposit will have Rs 70. What started off as an institution for the public with basic plans like savings account. Types of flexi bank accounts Many banks offer different types of flexi bank accounts and each have its own rules regarding the same. And guess what all this happens automatically once you set the rules.500 every year. Broadly there are two categories: one. To begin with you can open a fixed deposit ranging between Rs 25. .5 per cent interest or Rs 1.000 for a specific term depending on your bank. sweep account.000 would be transferred into your savings account from your flexi deposit with no charge which depends on your bank terms. The keyword is to launch products with exclusive features that will create a buzz and sell like hot cakes.000 the excess amount of Rs 5.000 earning you a 5 per cent interest or Rs 3. Your flexi account will allow you to meet your regular cash needs based on which you could set your limits and transfer the remaining amount to your term deposit and get higher interest. flexi fixed deposit account (FD) and two. Even the conventional banking industry is no exception to this new trend.000 would remain in your savings account waiting to meet your everyday needs and at the same time earning 3.050.All you wanted to know about a flexi bank account Today every product comes with a range of options to choose from. A flexi bank account is one such thing. How does flexi fixed deposit work? Simply put a flexi fixed deposit helps you withdraw funds whenever you require it. What are flexi bank accounts? As the name suggests these bank accounts are flexible in the sense they give you the higher interest of a fixed deposit and the liquidity of a savings account. And if you issue a cheque for Rs 35. There is also the option of enjoying a zero balance savings account for a higher fixed deposit amount. For example. The remaining Rs 30. fixed deposit and recurring deposit have now spiced up things by introducing newer features in a variety of packages.000 to Rs 50. in a flexi account of Rs 1 lakh (Rs 100.
000. And there is a pre-closure charge in case of premature closing of these accounts.5. Canara Bank's [sweep facility has a minimum ceiling of Rs 15. In such a situation your bank will withdraw from your flexi fixed deposit the excess amount required and deposit the same into your savings account. How does sweep account work? Also called savings plus account the sweep account is the reversal of a flexi fixed deposit. ICICI Bank's sweep account facility requires a minimum balance of Rs 10. Perhaps the biggest drawback of this system is that it can give you benefits only for a short term.000 from your flexi fixed deposit into your savings account. . This means that if you want to withdraw Rs 16. And if you have more than one fixed deposit then the bank will work on 'First In. in the case of HDFC bank the fixed deposit is split into units of Re 1 thus transferring only the exact amount needed and leaving the balance in your flexi fixed deposit to continue to earn interest as per the bank's rate. 000. Most banks penalize the customers if their savings account falls below the predetermined level. These types of accounts are only for a year as its main aim is to give you liquidity and higher interest. First Out' or FIFO basis thus breaking the first fixed deposit opened. fix a minimum limit and the balance that exceeds this limit in your savings account will be automatically transferred into your fixed deposit.000 creates a new fixed deposit whenever there is a transfer of money over and above Rs 10. For example if you hold a flexi fixed deposit account with IDBI Bank or ABN AMRO the fixed deposit is split into units of Rs 1. To begin with you should open a savings account.000 in your savings account the excess of which will be transferred to your fixed deposit in multiples of Rs. The sweep facility at State Bank of India (SBI) with a minimum of Rs 10.200 these banks will transfer Rs 17.000.000. However. Pros and cons of both these accounts A flexi fixed deposit account gives you the best of both worlds that is the higher interest of a fixed deposit and the liquidity of a savings account.The benefit of a flexi fixed deposit comes into play when you require more funds than what you have in your savings account. As said every bank has its own set of rules regarding flexi fixed deposit schemes. The flexi fixed deposit does not allow reverse sweep facility that is funds from your savings account cannot be transferred into your flexi fixed deposit whereas reverse sweep is possible in sweep account.
You should also take into account the drop in interest rates for fixed deposits from time to time. choosing to open these accounts would mean parking all your funds in one place and hence no diversification of your portfolio. Lastly. How should you decide which one to choose? If you are someone looking to make the idle money in your savings account to earn higher interest then this flexi schemes might be helpful.There is a limit to the overdraft and there are a minimum number of months for the money to remain in the account. . before you opt to open them you should carefully analyze your financial requirements as you might be penalized for falling below the predetermined levels or pre-closing of accounts. However.
3. instead of the dismal rate that you get from your savings account? There is a great way to achieve this – through hybrid accounts and auto-sweep facility. You decide the maximum amount that you want in your account. Thus. such FDs are automatically broken. Read on. especially for some of us who are so lazy that they keep large sums lying in their savings accounts. you earn a high interest rate on such amounts. You decide the tenure of these FDs After this. technology takes care of everything! . This money is not totally unproductive – you do get the regular savings account rate of interest on it. and you can withdraw just like a normal savings account.. Well. 2. You decide the amount for which the FDs need to be created. When you want to withdraw.. What is auto sweep facility? It is a great service. which is in the range of 4% for most banks. In a nutshell: An amount in excess of a pre-determined amount is automatically transferred to a fixed deposit (FD). that combines the liquidity of a regular savings bank account with the high yield of a fixed deposit (FD). How does the auto sweep facility work? 1. or is lying there while we think about spending or investing it. But can this money not work harder for us? Can it not earn a little more while it is lying idle? It would be really great if this was possible. it is possible – through auto sweep facility (also called “Flexi Deposit Scheme” by some banks). This is also called the threshold limit.Auto Sweep Facility: Smart way to make your money work harder Wouldn’t it be nice if any extra money with you could earn a good rate of interest. The amount can be small or large. but most of us do have spare money in our regular savings account that is either too little to invest somewhere. Almost all of us would have some extra money lying in our bank accounts.
the most recent FD is broken first. If the amount that you want to withdraw (through an ATM. one of the FDs would be broken immediately (this happens automatically). You can operate the account exactly like a regular bank account. Usually. you can earn returns in the range of 8% . Yes. This means that instead of the paltry interest on the savings account. investing the amount in liquid or money market (MM) mutual funds instead of investing in FDs. This means that any amount that you deem as excess earns the interest rate of an FD! Some banks also offer innovative investment avenues – for example. there is no penalty for breaking these FDs. if an FD has to be broken to provide for a withdrawal. Thus. and you would get the money. Liquidity The auto-sweep facility is extremely liquid. this excellent facility is absolutely free! Interest Rate The interest rate offered on these auto sweep FDs is the same as the rate offered on regular FDs of that duration. . cheque.Whenever the amount in your account becomes more than the sum of the maximum amount you specified (point 1 above) and the FD amount (point 2). (This is called Sweep-out or reverse-sweep) The entire process is totally seamless – you wouldn’t even know that an FD has been broken till you see your account statement! Most banks follow the FILO (First In Last Out) approach for breaking the FDs.9%. (This is called Sweep-in) Whenever such a situation happens. etc. an FD is created for the specified amount and the specified tenure (in point 3). a new FD is created. Cost The auto sweep facility is offered at no extra cost by most banks.) is more than the amount in your account.
and the account balance would be Rs.500. 10.000 Amount for which the FDs need to be created: Rs. The balance becomes Rs. 10.000 threshold + Rs. 5. As soon as this cheque clears. 15. Then. 5. 1. 11. and your salary of Rs.000 is deposited in the account. which is below the threshold limit of Rs. 14. and the account balance reduces to Rs. 17.000 = Rs. let’s say you have to withdraw Rs. 12. the bank’s computer would automatically create 3 FDs of Rs.500 in your account. you also write a cheque for Rs.000 + Rs. You withdraw it from the ATM. 3. (The calculation would be exactly the same even if you withdrew Rs. Now.500 to pay your credit card bill.000.000 per FD). since the amount is over Rs. Thus. 5. 1. you would have 3 FDs of Rs. 12. you would have Rs. 14.000 (Rs. like: • • • • • • • • • Auto Sweep Account Sweep-In Account Flexi Deposit Scheme Flexi Fixed Deposit Premium Savings Account Multi Option Deposit (MOD) Savings Plus Freedom Deposit Two in One (2-in-1) Account . and deposit the amount in your account.Example Let’s use an example to understand this better.000.000 each. Thus. Thus. Let’s say you opt for the following: The threshold limit: Rs.000.000 each. although it can be called by different names.000. 29. the bank would break 1 FD. At this time.000 for household expenses.000 The tenure of the FDs: 6 months Suppose the balance in your account is Rs. the account balance reduces to Rs. 10. 5.000 each. 5. 17. and would also have 2 FDs of Rs.000. 9.500 from the ATM instead of writing a cheque) Which banks offer the auto sweep facility? Almost all modern banks offer this facility.
Some of the banks that offer this facility are: • • • • • • • • • • • • • • • • • • ICICI Bank State Bank of India (SBI) State Bank of Mysore State Bank of Patiala State Bank of Bikaner and Jaipur (SBBJ) HDFC Bank Axis Bank (UTI Bank) Corporation Bank IDBI Bank Kotak Mahindra Bank Development Credit Bank (DCB) Oriental Bank of Commerce (OBC) Indian Bank Global Trust Bank (GTB) Andhra Bank Jammu and Kashmir Bank Citibank Indusind Bank .
there is a minimum amount stipulation which may be far more than the money you need but you can make up for the interest you lose by making further deposits in the FD account. but the name may vary. What are the applicable eligibility criteria? You either have to open a premium account. especially small businesses. This facility also works better than a regular savings account. you are looking for investment options a few months down the line a sweep account can help you manage money more efficiently. Should the balance in your account be insufficient to meet the requirement of a debit instruction received by the bank.000 to Rs 5. So. as soon as you open an FD. among others. Who stands to gain the most from this facility? If you are sitting on idle cash reserves say.5% interest.000. Not only can you withdraw the exact amount that you need in case of an overdraft. At the same time.000. Better still. depending on the bank. funds from your FD will be automatically swept into your account in predetermined blocks that vary from Re 1 to Rs 1. Most leading banks in the country. ICICI Bank has recently introduced a pure online account called B2 linked with this facility. the excess money swept into the FD account will earn at least double the interest. has no minimum balance requirement. What is the advantage of this product? For current account-holders. At the same time. more often than not. but in a sweep account. offer this facility. On any day. which is then linked to an FD account. others reverse the process and offer a sweep facility in lieu of overdrafts. ranging from Rs 1. you gain access to a savings or a current account which. you don't need to pay the additional fee and charges that an overdraft entails. On the other hand. or take an FD of at least Rs 25.What is a sweep account? This is an innovative deposit option that allows you the convenience of a bank account without compromising on the interest that your money earns compared with a long-term investment vehicle like a fixed deposit (FD). while at Standard Chartered Bank it's the 2-in-1 account. you only lose interest on the block withdrawn. if your account holds more money than is required as per the minimum balance criterion. The money parked in the latter earns just 3. it's called the sweep-in facility. at HDFC Bank. In case of the latter. the excess funds are automatically swept to the linked FD in predetermined units. where the minimum average monthly/quarterly balance is between Rs 25. Syndicate Bank calls it the premium savings account. ask you to open a savings account first. most banks allow you to link multiple FDs to your account. . a sweep account is a better option than taking an overdraft on an FD. Syndicate Bank and Bank of Baroda. How does it work? While some banks require you to open a bank account.000 and Rs 1 lakh. including public sector banks.000.
For example. which is attached to the savings account. 3. the money does not remain idle in this arrangement and also earn a higher rate of return for the customer.. a traditional fixed deposit carries an interest rate of 7 to 8 per cent. called as threshold limit. Highlights • ‘Auto Sweep’ combines benefits of a savings account and a fixed deposit account • An amount above specified limit is transferred from savings account to fixed deposit account automatically • At the time of a higher withdrawal. The change is visible everywhere.e. Thus.‘Auto Sweep’ facility: Have you enabled it? Retail banking in India has undergone a sea change in the last two decades. savings accounts hold a special place as customers use them for their day-to-day transactions like salary transfer. Understanding the ‘Auto Sweep’ facility Let’s understand this with the help of an example. Under this facility. is then automatically transferred to the customer’s fixed deposit account. loan repayment. you get two accounts – savings account and fixed deposit account – interlinked. electronic clearing services (ECS) payments. However. Since a major chunk of a person’s savings is kept in the savings account he/she tends to lose money.5 per cent! On the other hand. An amount above this specified limit. But these accounts offer a very little interest on savings. In this case. the excess is reverseswept from his/her fixed deposit account. the customer earns interest as per the prevailing fixed deposit rates for that particular period. i. . right from operations to products. a customer specifies the amount he/she wants to keep in his/her savings account or agrees to the minimum amount as decided by banks for auto sweep. It works like this: First. in retail banking. all commercial banks offer ‘Auto Sweep’ facility – a combination of saving and fixed deposit. but they can avert this loss by opting for Auto Sweep facility. the real benefits of a new thing are realised only when it is utilised completely. Whenever the customer wants to withdraw money greater than what he/she has in the savings account. money is reverse-swept from fixed deposit account • Interest rates offered on ‘Auto Sweep’ deposit and traditional fixed deposit are almost the same What is ‘Auto Sweep’? Today.
Rs 20. While some banks claim to inform their customers about the special schemes as and when they are launched. • In traditional fixed deposits. 1. say.000 on Jan. all banks calculate cumulative interest. Higher the CASA ratio.. The defined threshold limit for his ‘Auto Sweep’ account is Rs 10. but under different names. So. 2009. Disadvantages of ‘Auto Sweep’ • Some banks ask to put the money transferred under the ‘Auto Sweep’ facility for a minimum specified period. one-year deposits carry an interest rate of 8 per cent.000 will go to the fixed deposit account which offers a higher rate of interest. E.) Dev withdraws Rs 15. (Presently. Since he is already having Rs 10.5 per cent. Table: Banks Providing Auto Sweep Facility Banks ICICI Bank SBI Sweep Facility Auto Sweep Saving Plus Minimum Limit (Rs) 5. as given in the Table.000. the effective interest rate will be 6 per cent.000 (remaining amount in the fixed deposit account) unlike in normal savings account where he earns only 3.g. out of his total deposit.000 kept under the traditional fixed deposit will grow to Rs 11. While interest rates offered on ‘Auto Sweep’ deposit and traditional fixed deposit are almost the same. 1.000 in his ‘Auto Sweep’-enabled savings account on Jan. the current savings account rate. But not all customers are aware of it. Are customers aware of this facility? Auto Sweep facility is available in most of the commercial banks.000 5. ICICI Bank requires ‘Auto Sweep’ deposit to be kept for a minimum period of 1 year 1 day.000.000.Dev deposits Rs 30.g. which in any case will be higher than 3. Why are banks so reluctant about this facility? The reason lies in their CASA (Current Account/Savings Account) ratio which helps banks reduce their cost of deposits. in case of the former any premature withdrawal attracts a penalty on the total interest rate offered. he requires another Rs 10.449 at 7 per cent in two years while the same amount put in ‘Auto Sweep’ deposit will grow to Rs 11. an amount of Rs 10. E. So.000 while the minimum balance required by the bank is Rs 5. which will be taken from his fixed deposit account. In case Dev withdraws all his deposits after a period. but in ‘Auto Sweep’ deposits.000 Threshold . higher will be the net interest income. Any premature withdrawal of deposit will attract a penalty of 1 per cent on the offered deposit rate of 1 year 1 day. 2008.000 in his savings account (assuming that he has not done any transaction in this period) and he has to maintain a minimum balance of Rs 5.400 at the same rate. and in turn increases their net interest income. 5 months. if the deposit rate offered on 1 year 1 day is 7 per cent and the amount is withdrawn within 9 months. other banks prefer to keep mum over it.. some banks calculate simple interest. He earns 8 per cent on the deposit of Rs 10. he would be entitled to get the prevailing deposit rates for 5 months.5 per cent.
So.HDFC Bank IDBI Bank Kotak Bank DCB Dena Bank Corporation Bank OBC Yes Bank Bank of India Andhra Bank Source: Bank websites Sweep-in 50.000 * The list contains only major banks. especially meant for salaried people who often end up with some idle money in their savings accounts. investors get the best of both worlds – they enjoy the liquidity of savings account and at the same time earn extra return from fixed deposit account.000 Freedom Saving 5.000 Flexi Fixed Deposit 5. This is the best way to channelise and utilise one’s unused savings. Conclusion The idea is simple.000 Dena Sevifix 25.000 CorpClassic 25. ask your bank officials to enable it for the threshold limit as desired by you or to the bank’s minimum threshold limit. if your savings accounts are still not activated for the auto sweep facility.000 Saving Plus 25.000 Sweep-in 50.000 Smart Saver 25. .000 Auto Sweep 25.000 Sweep-in 50. With Auto Sweep facility.
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