Separate corpusĪpart from the higher interest rate, the sweep-in facility helps you create a corpus that you can access in an emergency, without having to liquidate any other asset. In such cases, banks usually apply the LIFO (Last in First Out) rule, which means that, when a sweep-in is triggered, funds will be transferred to your account from the latest deposit linked to the sweep-in facility. You can link multiple deposits to the current account for sweep-in to ensure you never have a liquidity crunch. There may, however, be a minimum holding period for FDs, and premature withdrawal may lead to loss of interest. Flexibilityīanks generally let you choose the period of the deposit, the maturity, and the threshold amount. Your bank will automatically transfer the funds from the amount invested earlier to your account to ensure timely payment of the EMI or the cheque, saving you time and effort. Say you have an EMI pending or a cheque due and are running low on funds in your sweep current account. The sweep facility enables you to have ample liquidity while ensuring a good return on your funds. To get a better understanding of your expected earnings, you could even use an FD interest calculator. The main reason for opting for the sweep facility is to earn interest on money in your account. Whether you are a business owner using it through your current account or a salaried individual using it out of a savings account, there are benefits aplenty to enabling the auto sweep facility. How Does the Auto Sweep Facility Benefit You? Pre-closure penalty: The penalty charged for withdrawing from a Fixed Deposit before its term has expired.The bank will liquidate the FD units created the earliest in the FIFO system. The bank may follow the FIFO (First In First Out) method or the LIFO (Last In First Out) method to liquidate FD units to maintain the stipulated balance in your account.In the LIFO system, the bank will liquidate the FD units invested in which you invested most recently, and the amount will be transferred to your account. LIFO or FIFO: The excess amount swept out of your account is invested in FD units, each of them typically broken into small denominations.Some banks, however, provide a flexible tenure for Fixed Deposits. Banks might offer only a 1-year deposit as part of the auto sweep facility.
FD tenure or period: It is the duration of the fixed deposit, that is, the time for which the FD has been created.Here are a few terms you should be familiar with before availing of the auto sweep facility: At the same time, all your excess cash gets the highest return from a safe fixed deposit. This process of sweeping the money into or out of your account happens at the end of each working day – ensuring that the optimum balance is maintained in your account. When the balance in your account falls below the stipulated threshold, the amount of the shortfall flows back into your account. The auto sweep facility, when enabled, transfers money from your account in excess of a stipulated balance to a deposit that gives you a greater return – usually a fixed deposit (FD).
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