Heres Everything you Need to Know About Sweep in Facility on FD

Sweep in facility lets you enjoy the best features of FD while giving you complete access to the funds by linking it with your savings/current account at the same time. Know more about this facility offered by banks in this post. Keep reading.

While a fixed deposit is a great savings tool, it poses some restrictions on the usage of funds while you’re invested. If you’re in sudden needs of funds, then you’ll need to break the entire FD. Moreover, this process could take a few hours to even a few days.

This makes your funds in FD difficult to access in times of urgent needs. But what if you have a cheque to honour and you don’t have enough money in your regular bank account? The sweep in facility on FDs brings you an effective way to solve these problems.

The sweep in facility helps you in maximising the benefit of both fixed deposit and savings accounts. But how? Let's start with the basics.

What is the Sweep in Facility on FD?
A sweep in facility allows the bank to transfer the funds from the fixed deposit account to process a debit demand on a savings or a current account. Here, a fixed deposit and a savings account or a current account are linked together. Once linked, the funds can be swept in from the fixed deposit whenever a need arises.

How Does the Facility Work?
A sweep in facility supplies your funds from the deposit whenever the debit request on a savings or a current account falls short. Here is an example to demonstrate the same.

Let’s understand this with an example.

Mr Sriram has Rs 6000 in his savings account and Rs 10,000 in a fixed deposit account with the same bank which is linked to his savings account. Sriram issues a cheque of Rs 8,000. When the cheque comes to Sriram’s bank for clearing, the bank transfers the required amount (Rs 2000) from the fixed deposit account to the savings account to honour the cheque.

A couple of points to note here;

• If you have more than one FD with the sweep in facility, then one of it will be utilised first to refuel your account in times of need.
• Only the principal amount of your FD is considered for this facility. For instance, if the principal value is Rs 10,000 and the interest value is Rs 1000, then only Rs 10,000 can be utilised to refill your savings or current account.

What is the Eligibility criteria for the Sweep in Facility?
While the eligibility criteria range from bank-to-bank, there are a few universal pre-requirements that need to be met:

• You must have both- an FD and a current or savings account with the bank.
• The minimum deposit amount for the fixed deposit should be present.

What are the Advantages of a Sweep in Facility?

1. The amount present in a fixed deposit enjoys a higher interest rate since FD's offer higher interest rates than savings accounts. Thus, your funds earn more interest than they would or would not have earned (in case of current account) in a regular bank account.
2. The account holder does not have to break an FD to access the funds. The necessary amount is simply transferred from the deposit account and the interest earned on it is deducted as per the terms of the deposit.
3. Sweep in facility solves the liquidity issue with an FD and makes the money present in an FD account much more accessible.
4. Multiple banks allow linking multiple deposit accounts to the savings account. While some banks follow the rule of LIFO (Last in First Out), where funds are first drawn from the last deposit account that was linked, a few banks transfer the funds from the account with the least rate of interest thereby minimising the loss on the interest earned.

Enjoy Flexibility on FD Conditions

In case of sweep in FD, banks offer flexibility on the FD details. An individual can alter conditions like the period of deposit, payment and maturity of the deposit. The extent of flexibility can vary among different banks. Therefore, read all the conditions before opting for a sweep-in-facility.