Auto Sweep Facility is a smart banking feature that automatically transfers excess funds from your savings account to fixed deposits (FDs), helping you earn higher interest rates while maintaining liquidity. This facility combines the convenience of a savings account with the higher returns of fixed deposits, making it an attractive option for managing idle funds. This comprehensive guide explains how auto sweep facility works, its benefits, and how to make the most of it.
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What is Auto Sweep Facility?
Auto Sweep Facility, also known as Sweep-in or Flexi Fixed Deposit, is a banking feature that automatically converts excess balance in your savings account into fixed deposits. When your savings account balance exceeds a pre-defined threshold, the excess amount is automatically transferred to an FD to earn higher interest rates.
The facility works in reverse as well - if your savings account balance falls below the threshold and you need funds, money is automatically withdrawn from the FD to meet the requirement.
How Auto Sweep Facility Works
Sweep-In Process
When you deposit money or receive credits in your savings account:
Bank checks if balance exceeds the threshold amount
Excess amount is automatically transferred to FD
Multiple FDs may be created based on sweep amount
FDs are created in multiples (e.g., ₹10,000, ₹25,000, ₹50,000)
You continue to earn FD interest on swept amount
Savings account maintains minimum balance
Sweep-Out Process
When you need funds and savings account balance is insufficient:
Bank automatically breaks the FD (latest one first or as per policy)
Required amount is transferred to savings account
Pre-mature withdrawal penalty may apply (varies by bank)
Remaining FD amount continues to earn interest
Process is seamless and automatic
Key Features of Auto Sweep Facility
Automatic Transfer: No manual intervention required
Higher Returns: Earn FD interest rates instead of savings account rates
Liquidity: Funds available when needed without visiting bank
Flexible Threshold: Set minimum balance threshold as per your needs
Multiple FDs: Bank creates multiple FDs in fixed multiples
Premature Withdrawal: Can break FDs automatically when needed
Interest Rate: Earns FD interest rates (higher than savings account)
Tax Benefits: TDS deduction as per FD norms
Benefits of Auto Sweep Facility
Financial Benefits
Higher Interest: Earn 2-3% more than regular savings account
Optimal Returns: Maximize returns on idle funds
Automatic Management: No need to manually create FDs
Liquidity: Access funds immediately when required
No Penalty (in some cases): Some banks offer penalty-free premature withdrawal
Convenience Benefits
Seamless Operation: Works automatically without your intervention
Time Saving: No need to visit bank or create FDs manually
24/7 Access: Funds available through internet banking and ATMs
Simple Management: Single account for both savings and FDs
Transparency: All transactions visible in account statement
How to Enable Auto Sweep Facility
Online Method
Login to your internet banking or mobile banking app
Navigate to "Services" or "Accounts" section
Select "Auto Sweep" or "Sweep-in Facility"
Set threshold amount (minimum balance to maintain)
Choose sweep amount (multiples in which FD will be created)
Review terms and conditions
Submit the request
Facility is activated immediately
Offline Method
Visit your bank branch
Fill Auto Sweep Facility application form
Provide account details and threshold amount
Submit the form along with identity proof
Bank activates the facility within 1-2 working days
Auto Sweep Facility Terms and Conditions
Threshold Amount
Minimum balance that must be maintained in savings account. Excess above this amount is swept to FD. Typical thresholds: ₹25,000, ₹50,000, or ₹1,00,000 (varies by bank).
Sweep Amount
Amount in multiples of which FD is created. Common multiples: ₹10,000, ₹25,000, ₹50,000, or ₹1,00,000. For example, if sweep amount is ₹25,000 and you have ₹75,000 excess, three FDs of ₹25,000 each are created.
FD Tenure
Usually 1 year, but varies by bank. Some banks offer flexible tenure options.
Interest Rates
FD interest rates apply (typically 5-7% per annum), which is higher than savings account rates (2.5-4% per annum).
Premature Withdrawal Penalty
Most banks charge penalty for premature FD closure (0.5-1% reduction in interest rate). Some banks offer penalty-free premature withdrawal for auto sweep FDs.
Interest Calculation
Interest is calculated separately for:
Savings Account Balance: At savings account interest rate (2.5-4% p.a.)
Swept FD Amount: At FD interest rate (5-7% p.a.)
Interest is credited quarterly or monthly as per bank policy
TDS is deducted on FD interest if it exceeds ₹40,000 per year (₹50,000 for senior citizens)
Comparison: Auto Sweep vs Regular Savings Account
Regular Savings Account:
Interest Rate: 2.5-4% per annum
Liquidity: High
Returns: Lower
Management: Manual
Auto Sweep Facility:
Interest Rate: 5-7% per annum (on swept amount)
Liquidity: High (automatic sweep-out)
Returns: Higher
Management: Automatic
Who Should Use Auto Sweep Facility?
Individuals with high savings account balances
Those who want higher returns without losing liquidity
People who don't want to manually manage FDs
Salaried professionals with regular income
Business owners with fluctuating account balances
Anyone looking to maximize returns on idle funds
Important Points to Remember
Premature withdrawal penalty may apply (check with your bank)
TDS is deducted on FD interest as per income tax rules
Threshold and sweep amounts vary by bank
Multiple FDs are created, not a single large FD
Latest FD is broken first when funds are needed
Facility can be disabled anytime through net banking or branch
Not available for all types of savings accounts
Check bank charges for enabling/disabling the facility
How to Disable Auto Sweep Facility
Login to internet banking or mobile banking
Navigate to Auto Sweep section
Select "Disable" or "Deactivate" option
Confirm the action
Existing FDs continue till maturity or can be closed
No new sweep-in will happen after deactivation
Conclusion
Auto Sweep Facility is an excellent feature for maximizing returns on idle funds while maintaining liquidity. It automatically manages your savings by converting excess balance into FDs, helping you earn higher interest rates without manual intervention. If you maintain a high balance in your savings account, enabling auto sweep facility can help you earn significantly higher returns with minimal effort.