Savings Account with Sweep Facility
Low-Risk Investment Schemes | Taxation, Benefits, Interest Rates, Associated Risks & Smart Way to Grow Idle Money
A Savings Account with Sweep Facility is a smart bank account designed to keep money safe while earning higher interest.
Many traditional savings accounts give low interest. However, this special type of account automatically moves extra money into fixed deposits to earn more.
When money is needed for expenses, it moves back to the savings part of the account.
Savings Account with Sweep Facility blends safety, convenience and higher returns. It works quietly to make money earn more. When paired with knowledge of safe instruments such as RBI Floating Rate Savings Bonds and then financial planning becomes stronger.
Banks offering this facility make savings time-efficient and intelligent while keeping money accessible.
Let’s have a detailed discussion using very simple language.
Also Read: RBI Floating Rate Savings Bonds; Looking for Safe Returns ? Then Everything You Need to Know About
What is Savings Account with Sweep Facility?
Savings Account with Sweep Facility is a linked banking service where the bank creates a Fixed Deposit (FD) from the savings balance above a set minimum.
Now confirming you- This happens automatically. A minimum balance stays in savings for daily use and the rest goes into FD to earn higher interest. This is also called “Sweep In Account” or “Auto Sweep Account“.
How Savings Account with Sweep Facility Works
- Considering, If the minimum required balance is Rs.10,000, any amount above that is shifted to FD. So if balance is Rs. 50,000 then Rs.40,000 becomes FD.
- When withdrawal is needed the FD amount is broken and moved back to savings to cover the withdrawal.
Why Savings Account with Sweep Facility Is Helpful
This type of account is ideal for people who want more interest than a normal savings account without manual transfers.
It works silently in the background. Let’s Discuss Main Advantages-
- Higher Interest Earnings: Fixed Deposit rates are much higher than savings account rates.
- Zero Manual Effort: Movement of funds is automatic so no need to constantly book FDs.
- Easy Access: Money can be accessed whenever needed without penalty (partial break from FD).
- Flexible Threshold: Minimum balance can be chosen at account opening.
How to Open Savings Account with Sweep Facility
Opening this account is similar to any regular savings account process. Most major banks in India offer this facility.
Steps usually include as follows
- Visit bank branch or bank website.
- Fill Savings Account opening form with sweep request as well.
- Submit KYC documents (ID proof, address proof, photo).
- Choose minimum threshold balance to trigger FD.
- And then Sign sweep facility request.
Once active this facility runs automatically without daily tracking.
Also Read: Liquid ETF: Safe, Liquid and Better Alternative to Savings Account for Short Term Investment
Bank Wise Interest Payment (Typical)
Interest rates vary between banks and change with RBI policy shifts. Below is typical reference range, not fixed:
- Savings Account: Around 3% to 4% per annum
- Fixed Deposit under Sweep: Around 5% to 7% per annum depending on tenure and bank
For exact interest rates, please check bank official website or visit bank branch. Many banks update FD rates quarterly.
Regular Savings Account vs Sweep Facility
| Feature | Regular Savings Account | Savings with Sweep Facility |
|---|---|---|
| Interest Rate | Low (approx. 3-4%) | Higher (FD rates around 5-7%) |
| Effort | No extra effort | Automatic higher earnings |
| Accessibility | Immediate | Immediate with FD break |
| Penalty | No | Possible small break penalty if FD broken early |
Savings Account with Sweep Facility Benefits
- Better Returns: Earn more without manual effort.
- Liquidity: Money is accessible when needed.
- No Extra Cost: Usually no added fee for sweep service.
- Peace of Mind: Balance works harder every day.
Savings Account with Sweep Facility Risks
While this service is useful but some points are good to consider-
- Break Charges: Some banks may charge a small penalty for breaking FD early.
- Interest Variation: FD rate may change with bank policy.
- Minimum Threshold: Poor choice of threshold balance may reduce benefit.
Who Can Benefit Most?
Sweep facility is helpful for people keeping extra funds in savings for long periods.
Small business owners, professionals with fluctuating cash needs and salary account holders with surplus balance often gain more interest over time.
More About: Savings Account with Sweep Facility
Frequently Asked Questions (FAQ)
(i). Is sweep facility safe?
Yes, sweep facility is safe as funds remain within the bank and fixed deposits are protected as per banking regulations.
(ii). Does sweep facility affect withdrawals?
No, withdrawals remain seamless. Required amount is automatically transferred from fixed deposit to savings.
(iii). Is tax applicable on sweep fixed deposit interest?
Yes, interest earned from fixed deposits under sweep facility is taxable as per income tax rules.
(iv). Can sweep facility be turned off?
Yes, banks allow deactivation of sweep facility upon request.
(v). Is sweep facility better than normal fixed deposit?
Sweep facility offers better liquidity compared to normal fixed deposits while still earning higher interest.