What Is a Fixed Deposit Sweep-in Facility?

A fixed deposit sweep-in facility links a primary operating account, such as a savings or checking account, with a fixed deposit account. This automated feature aims to optimize interest earnings on surplus cash while ensuring liquidity for everyday needs. It offers a structured way to save and access funds without constant manual intervention.

Understanding Fixed Deposit Sweep-in

A fixed deposit sweep-in is an automated banking feature connecting a primary operating account, such as a savings or checking account, with a fixed deposit (FD) account. Its purpose is to ensure that money not immediately needed for daily transactions earns a higher interest rate than it would in a standard savings account. This mechanism helps individuals and businesses maximize returns on idle funds by automatically moving surplus cash into a higher-yielding fixed deposit. This creates a hybrid account that combines the liquidity of a savings account with the earning potential of an FD.

Operational Mechanics

When the balance in the linked primary account exceeds a pre-defined threshold, the excess amount is automatically transferred, or “swept,” into a fixed deposit. This transfer often occurs at the close of each business day, creating new fixed deposits. Conversely, a “reverse sweep” or “auto-reverse” mechanism ensures funds are available when needed. If the primary account’s balance falls below a specified minimum, or if a transaction requires more funds, money is automatically moved back from the fixed deposit to cover the shortfall. This process typically involves breaking the fixed deposit into smaller units to replenish the primary account.

Key Characteristics

Funds swept into the fixed deposit typically earn interest at rates comparable to regular FDs, which are generally higher than standard savings account rates. This ensures optimized earnings on surplus cash. The facility also preserves liquidity, allowing access to funds from the fixed deposit when needed without prematurely breaking the entire deposit and incurring penalties on the full amount. Users can configure threshold limits, setting the specific balance above which funds are swept into the FD and the minimum balance that triggers a reverse sweep. This customization enables effective cash flow management and helps maintain the primary account’s operational balance.

Activating a Sweep-in Facility

Activating a fixed deposit sweep-in facility typically involves a straightforward process. Individuals can initiate this service through various channels, including online banking platforms, mobile applications, or by visiting a bank branch in person. The application process generally requires linking the primary operating account, such as a checking or savings account, to the fixed deposit. During setup, users will need to specify desired threshold limits for their primary account, determining when excess funds are swept into the FD and when funds are drawn back. After submitting the necessary details and confirming the terms, the facility is typically set up within a few business days.