Sweep In Account facility (2020) FD: Good when Savings Account Rates fall?

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As savings account interest rates are falling, many people in India are considering Sweep In Account facility in 2020-21. On a very broad level, the sweep account or auto sweep facility allows you to enjoy the combined benefits of saving account and fixed deposit using your savings account itself.

It is called by many names like Auto Sweep Bank Account, Sweep In Account, Flexi Account, Sweep In fixed deposits, Flexi FD, Savings Plus, Sweep In Sweep Out facility account, etc.

And systematically important banks like SBI, ICICI & HDFC also offer auto sweep facilities to their account holders – like in Auto sweep facility in SBI (or Auto sweep account in SBI or SBI Sweep account), Auto sweep account ICICI (or ICICI Sweep In FD), HDFC Auto sweep (or Fixed deposit sweep HDFC).

So let’s see how it works and whether it is beneficial or not.

What is a Sweep In facility in Savings Account (2020)?

If your saving account balance exceeds a given threshold limit (stipulated by you), the excess amount is automatically converted into a fixed deposit and it begins to earn the regular fixed deposit interest. In case you need the money back, the FD is liquidated automatically.

So basically, the facility tries to earn a higher rate of interest on Fixed deposits tied to the savings bank account and gives the ease of withdrawing money i.e. full liquidity.

How does Sweep In account work (2020)?

As you understand, the sweep in account facility is like having a flexible fixed deposit linked to your savings account. It pays a higher rate of interest than savings bank accounts—the same as other FDs.

Suppose you have a savings account (giving 3% interest rate) with a sweep in FD facility. Now, the chosen threshold is Rs 25,000. This means that every time the balance goes above Rs 25,000, the bank will automatically create an FD of the amount exceeding the threshold.

Let’s say you have a balance of Rs 1 lac in your savings account. This exceeds the threshold of Rs 25,000. Now the bank will leave Rs 25,000 in your savings account and create FD(s) of remaining Rs 75,000. How many FDs? It depends on chosen FD size. So if you have chosen that bank makes FDs of Rs 5000 each, then the bank will create 15 FDs of Rs 5000 each. If you have chosen to make FD of Rs 15,000 each then the bank will create 5 FDs of Rs 15,000 each.

So at this point, the savings account has Rs 25,000 and earn 3% interest rate. But assuming you have 5 FDs of Rs 15,000 in flexible sweep in deposits, then these would be earning a higher interest rate of 5-7% depending on the FD tenures.

After a few days, for some reason, you need to spend Rs 35,000. But your savings account balance is Rs 25,000 only. Don’t worry as the Flexi-FD part gives you full liquidity. You can go ahead and transact. The excess Rs 10,000 over and above your savings account balance of Rs 25,000 will flow into your savings account from the sweep-in FD. That is, one sweep in deposit of Rs 15,000 will have premature withdrawal. What interest will you get on the FD that has been prematurely withdrawn? You will get the applicable interest rate depending on the amount and actual tenure, i.e. the number of days for which the FD was maintained.

So that’s how Sweep In FD works. If one chooses to go with sweep-in deposit facility, then any amount above a certain threshold limit in the saving account is automatically converted into an FD.

But it’s possible that the actual working of the sweep-in FD facility will vary from one bank to another. But broadly, this is how it works fundamentally.

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What is Tenure of Sweep in Account Deposits?

Different banks follow different approaches. So many will give the account holder the option of pick a tenure, while others will only offer one fixed tenure, mostly 1 year FDs.

Since the facility will eventually witness premature withdrawals, so do banks put any additional charges? Some banks may charge a premature withdrawal penalty for breaking the FD before the chosen term. But there are many banks that don’t charge this penalty.

But of course, the interest rate applicable on prematurely withdrawn FD will be lower as the number of days of FD will be lower. Suppose you picked default FD tenure as 1 year but withdrew some amount leading to premature FD withdrawal at 90 days (3 months. So obviously you will get FD interest rate applicable to the 90-day period and not full 1-year period.

What is Interest rate on Sweep In Deposit Accounts (2020)?

Generally, the interest rate on offer is similar to what is offered on regular FDs.

But some banks may offer differential interest rates.

Last In First Out (LIFO) Vs First In First Out (FIFO) in Sweep In Accounts

Don’t’ worry about the crazy acronyms. It’s simple enough to understand. The sweeps between the savings account and the FD can happen in 2 ways.

One is by Last In First Out (LIFO) method, i.e. the last FD booked is broken first for any withdrawals. Or via the First In First Out (FIFO) method, i.e. the first FD created with sweep-in money is used first for withdrawals.

Which is better LIFO Vs FIFO in Sweep in Deposit Accounts?

Generally, the LIFO approach allows the oldest FD to earn interest for longer. So it’s better. But if you have frequent withdrawals, then FIFO is better as latest FDs otherwise wouldn’t be able to earn anything due to frequent withdrawals. But this aspect doesn’t matter much if the amount in question isn’t very large.

Taxation of Sweep In Accounts of Banks (2020)

This is important. First thing I need to remind you is that the interest earned in a savings account under Section 80TTA is tax-exempt up to Rs 10,000 per year. But this exemption is not available for fixed deposits. And since sweep in deposits are a form of fixed deposits, so Section 80TTA deduction not available on Sweep In Account deposit Interest as well.

So the extra interest earned by a sweep in deposits will be taxable as per one’s income slab. Therefore, sweep-in will suit those in the lower tax bracket than those in higher tax brackets. For those in higher tax brackets, debt funds can be very good options as the taxation of debt funds is very investor-friendly when compared with the taxation of fixed deposit interest.

I personally use debt funds much more than fixed deposits. But that’s me. Everyone’s situation is unique and hence they should do what is best for them.

Picking good debt funds is very important and if you don’t know how debt funds actually work and what risks they carry, better to stick to FDs till you understand debt funds.

But don’t be 100% sure about banks these days as well. You need to pick the right and safe bank for fixed deposit too.

How Is Interest Calculated On Sweep In Accounts?

When you use the Sweep In Deposit facility attached to your savings account, then the every sweep in FD generated will have a fixed tenure.

Now if the sweep in FD completes its tenure, then you will get full interest for the period. But in a case of premature withdrawal of the sweep in FD, you will get the interest as per the period for which the FD was maintained. You may also have to bear some penalty for premature withdrawal.

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Interest Rate on Sweep In Deposits Vs Savings Account

I did a brief comparison of savings account interest rates of various banks. Here are the savings account interest rates (June 2020) for Indian banks:

  • Allahabad Bank (3.5%)
  • Andhra Bank (3%)
  • AU Finance (Up to 6.40%)
  • Axis Bank (3.25% – 5.25%)
  • Bank of Baroda (3.00% – 3.25%)
  • Bank of India (3.25% – 3.50%)
  • Bandhan Bank (4.00% – 7.15%)
  • Bank of Maharashtra (3.25% – 3.50%)
  • Canara Bank (3.25% – 3.75%)
  • Central Bank of India (3.00% – 3.25%)
  • Citibank (3.25%)
  • Corporation Bank (3%)
  • Dena Bank (3.00% – 3.25%)
  • Dhanlaxmi Bank (3.5%)
  • DBS Bank (Digibank) (4.00% – 7.00%)
  • Federal Bank (2.25% – 3.65%)
  • HDFC Bank (3.50% – 4.42%)
  • HSBC Bank (3.5%)
  • ICICI Bank (3.25% – 3.75%)
  • IDBI Bank (3.50% – 4.00%)
  • IDFC Bank (Upto 7.00%)
  • India Post Payments Bank (3%)
  • Indian Bank (3.5%)
  • Indian Overseas Bank (3.50% – 3.75%)
  • IndusInd Bank (4.00% – 6.00%)
  • Jammu and Kashmir Bank (3.25%)
  • Jana Small Finance Bank (5.00% – 8.00%)
  • Karnataka Bank (3.00% – 5.00%)
  • Kotak Bank (4.00% – 5.00%)
  • Lakshmi Vilas Bank (3.50% – 6.50%)
  • Oriental Bank of Commerce (3.25% – 3.80%)
  • Punjab National Bank (3.25% – 3.80%)
  • Punjab & Sind Bank (3.50% – 4.00%)
  • RBL Bank (5.00% – 6.75%)
  • South Indian Bank (2.50% – 5.30%)
  • State Bank of India (SBI) (2.75%)
  • Syndicate Bank (3.25% – 3.75%)
  • UCO Bank (2.50% – 3.00%)
  • Union Bank of India (3%)
  • United Bank of India (3.50% – 3.75%)
  • Utkarsh Small Finance Bank (7.00% – 7.75%)
  • Vijaya Bank (3.00% – 3.25%)
  • Yes Bank (5.00% – 6.25%)

As is clearly evident in the list above, most of the larger banks have reduced the savings account interest rate in 2020-21. New and smaller banks are still offering higher rates to attract customers. But you should be careful about picking safe banks in India.

Almost all the above-listed banks offer Auto Sweep Account Facility. But different banks will provide this auto sweep in account facility with different names. Also, the facility may not be provided to all the customers.

Sweep In Account Interest Rates (2020)

More or less, the sweep in account interest rate are the same as the fixed deposit interest rate for a specified period.

Now it’s difficult to compare the fixed deposit rates of all banks. So let me pick few major ones like SBI, ICICI Bank and HDFC Bank to show the comparison:

SBI Fixed Deposit Interest Rates (2020)

Remember that SBI’s savings account interest rate is 2.75%. Here are the SBI Fixed Deposit Interest Rates or SBI Sweep In Deposit Facility Rates (2020) for various tenures:

  • SBI Fixed Deposit (7 days to 14 days) : 2.9%
  • SBI Fixed Deposit (15 days to 29 days) : 2.9%
  • SBI Fixed Deposit (30 days to 45 days) : 2.9%
  • SBI Fixed Deposit (46 days to 60 days) : 3.9%
  • SBI Fixed Deposit (61 days to 90 days) : 3.9%
  • SBI Fixed Deposit (91 days to 120 days) : 3.9%
  • SBI Fixed Deposit (121 days to 184 days) : 3.9%
  • SBI Fixed Deposit (185 days to 210 days) : 4.4%
  • SBI Fixed Deposit (211 days to 270 days) : 4.4%
  • SBI Fixed Deposit (271 days to 289 days) : 4.4%
  • SBI Fixed Deposit (290 days to less than 1 year) : 4.4%
  • SBI Fixed Deposit (1 year) : 5.1%

These are Sweep In FD SBI interest rates (2020).

Source – SBI Interest Rates

ICICI Bank Fixed Deposit Interest Rates (2020)

Remember that ICICI Bank’s savings account interest rate is 3.25 – 3.75%. Here are the ICICI Bank Fixed Deposit Interest Rates or ICICI Bank Sweep In Deposit Facility Rates (2020) for various tenures:

  • ICICI Fixed Deposit (7 days to 14 days) : 3.25%
  • ICICI Fixed Deposit (15 days to 29 days) : 3.5%
  • ICICI Fixed Deposit (30 days to 45 days) : 3.75%
  • ICICI Fixed Deposit (46 days to 60 days) : 4.25%
  • ICICI Fixed Deposit (61 days to 90 days) : 4.25%
  • ICICI Fixed Deposit (91 days to 120 days) : 4.25%
  • ICICI Fixed Deposit (121 days to 184 days) : 4.25%
  • ICICI Fixed Deposit (185 days to 210 days) : 4.75%
  • ICICI Fixed Deposit (211 days to 270 days) : 4.75%
  • ICICI Fixed Deposit (271 days to 289 days) : 4.75%
  • ICICI Fixed Deposit (290 days to less than 1 year) : 5.25%
  • ICICI Fixed Deposit (1 year) : 5.55%
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These are Sweep In FD ICICI Bank interest rates (2020).

Source – ICICI Bank Interest Rates 

HDFC Bank Fixed Deposit Interest Rates (2020)

Remember that HDFC Bank’s savings account interest rate is 3.50 – 4.42%.

Here are the HDFC Bank Fixed Deposit Interest Rates or HDFC Bank Sweep In Deposit Facility Rates (2020) for various tenures:

  • HDFC Fixed Deposit (7 days to 14 days) : 3%
  • HDFC Fixed Deposit (15 days to 29 days) : 3.5%
  • HDFC Fixed Deposit (30 days to 45 days) : 4%
  • HDFC Fixed Deposit (46 days to 60 days) : 4.5%
  • HDFC Fixed Deposit (61 days to 90 days) : 4.5%
  • HDFC Fixed Deposit (91 days to 120 days) : 4.5%
  • HDFC Fixed Deposit (121 days to 184 days) : 4.5%
  • HDFC Fixed Deposit (185 days to 210 days) : 5%
  • HDFC Fixed Deposit (211 days to 270 days) : 5%
  • HDFC Fixed Deposit (271 days to 289 days) : 5.25%
  • HDFC Fixed Deposit (290 days to less than 1 year) : 5.25%
  • HDFC Fixed Deposit (1 year) : 5.6%

These are Sweep In FD HDFC Bank interest rates (2020).

Source – HDFC Bank Interest Rates

So, all in all, it can be safely said that even though the interest rate on the sweep in account depends upon the bank and the tenure of your deposits, it is more or less always more than what the simple savings account would offer.

That’s about it.

By the way, if you are a senior citizen, then you have other decent options as well. You can read Best Interest Income Options for Senior citizens to know more.

At times, banks occasionally launch limited-period special deposits for senior citizens which pay comparatively higher interest rates. Even those from the larger banks can also be good bets for senior citizens or retirees.

Note – If you are looking for monthly interest from fixed deposits, then you may like to read monthly interest Rs 1 crore fixed deposit OR monthly interest Rs 2 crore fixed deposit OR monthly interest Rs 50 lakh fixed deposit.

In general, the main attraction of Sweep In Account deposits of Auto sweep accounts is that if you have surplus money in a savings account, then it can earn potentially FD-like interest – which is generally higher than savings account interest. But if you have frequent withdrawals from the account which will lead to premature FD withdrawals, then it won’t be very useful.

So the Sweep-in sweep out accounts combine the benefits of savings account and fixed deposits, thereby giving higher interest than a savings account. But whether you should opt for Auto-Sweep facility in your Savings Bank Account or not is something that should be analyzed on a case to case basis.

Hopefully, you would have found this detailed guide on Sweep In Account deposits and facility (2020) useful. And it would also be clear that how sweep in account works in India and gives higher interest than regular savings account to account holders.



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Dev Ashish
A SEBI Registered Advisor and founder of Stable Investor, Dev Ashish is helping people achieve their Financial Goals & Invest profitably.
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