Auto sweep facility is a smart banking feature which automatically transfers excess funds from a savings account to a fixed deposit (FD) for higher interest, while allowing reverse transfers for liquidity i.e., funds are swept back in when needed, offering both returns and flexibility.
For Example
You can set a threshold limit say ₹5,000 in your savings account. If the balance in the savings account above the set limit then the excess amount automatically "sweeps" into an FD.
If the amount in savings account is below the minimum limit say ₹5,000, then this auto sweep transfer - fund from fixed deposit account to your savings account to maintain the minimum limit.
Reverse Sweep method
When balance drops below the threshold, funds "sweep in" from FDs to savings. Two methods apply:
FIFO (First In First Out) assumes the oldest items added are used or removed first. LIFO (Last In First Out) assumes the newest items are used or removed first.
In auto sweep facilities, FIFO breaks the earliest-created FDs during reverse sweeps, while LIFO breaks the latest ones first. This affects interest earned based on each FD's age and penalties.
Benefits
Earn FD interest on idle savings without manual transfers.
You will don’t lose access to your money, it moves back into your account when needed.
Promotes disciplined saving, customizable thresholds and tenures suit goal-based funds. Available at major banks like HDFC, ICICI, SBI.
Major Drawbacks
Frequent transactions trigger premature FD withdrawals, applying lower interest after 1% penalties.
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