What Is Auto Sweep Facility: Meaning, Benefits & Activation Process

Key Takeaways
 

1. Auto Sweep automatically moves the extra money to short-term fixed deposits. This way, you earn higher FD rates and create an emergency fund for yourself.
    
2. With Autosweep, you get higher returns (more than your savings account) and instant access when needed.
    
3. If you break the FDs earlier, you can face penalties (about 0.5–1%). Be vigilant about tax and TDS rules on FD interest (TDS at 10% above ₹50,000 unless Form 15G/15H submitted). 

Auto Sweep Facility is a bank feature where extra money in your savings account automatically shifts to a fixed deposit. It gives both liquidity and better returns.

For example, Anita keeps ₹80,000 in her savings account. Her auto sweep limit is ₹50,000. The extra ₹30,000 moves into an FD earning 6% annually. Let’s see her current finances in the table given below.
 

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Here, if there were no auto-sweep, Anita would earn ₹2,800 extra. This amount is ₹750 less than her current earnings. 

Savings and FDs are one of the best and safest combinations for any beginner. To automate this combination, many people use the auto-sweep feature. It ensures you are not losing out on interest while still having funds ready when needed. 

Let’s learn more about it, from its working, benefits, to the activation process in this blog.

How Does The Auto Sweep Function work?

With auto sweep, your savings account will become smarter than you. ‘Paisa kab, kahan, kite phonchane hein, sab pta hai!’ This way, you earn more interest and can also move it back into your account when you need it. 

Now, let’s figure out how it's working. It is of 2 types: Sweep Out and Sweep In.

1. Sweep Out (Auto Sweep-In)

You set a balance limit for your account (say ₹25,000). Whenever your account balance goes above this limit, the extra money is automatically moved into a short-term FD. This way, you earn FD-level interest on what would otherwise just sit there earning low savings interest.
 

2. Sweep In (Reverse Sweep)

If your account balance drops below the set limit, the bank breaks the FD in parts and moves just enough money back. You don’t even have to ask; it’s instant.

For example, let’s say on 15th March, you need to make a big payment.
 

• Your savings account has ₹10,000 left.
   
• You need to pay ₹35,000.
   
• The bank breaks ₹25,000 from your FD and moves it back instantly so the payment goes through.
   

Before you enable the auto sweep feature, keep in mind the following instructions:
 

Auto Sweep is a good feature only if you know how to control it. 

Do you know that savings accounts in India offer around 2.5% per annum interest, while sweep-in fixed deposits provide 6% or more per annum?

Why People Love the Auto Sweep Facility?

In this section, we will see the benefits Auto Sweep provides to its users. Fair warning: once you see how smart this feature is, you’ll probably want it on all your bank accounts! 
 

1. Earn Higher Interest
    

Idle money in savings accounts hardly grows. With Auto Sweep, any extra above your set limit moves into an FD and earns much better rates. Instead of 3-4% interest savings, your money could earn more. 
 

2. Stay Liquid, Always
    

Emergencies do not knock and come. You may need money unexpectedly, and that should never be your problem. Auto sweep automatically moves funds back from the FD to your savings account. You get the best of both worlds: higher return + full liquidity.
 

3. Fully Automated, Zero Effort

Once activated, you don’t have to put in any effort. You don’t need to participate in the hassle of moving money, opening new FDs, or chasing branches. It’s smart banking made easy.
 

4. Total Flexibility
    

You control the threshold amount, that is, the limit for auto sweep, FD tenure, and even link multiple accounts. It adapts to your lifestyle.
 

5. Builds an Emergency Fund

Without thinking about it, your surplus funds grow into the safest investment option. If you keep it that way, you have a small emergency fund that can be used whenever you want, without any planning.
 

We have summarised the above content in the table given below:
 
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Builds reserve money without extra effort

Auto sweep develops discipline in terms of investment. It prevents us from spending extra and automatically invests that money in various instruments (stocks, FDs, etc.)

Things to Watch Out For with Auto Sweep

‘Har sikke ke do pehlu hote hain!’. If you stay vigilant and use this financial tool in a smart way, you can save yourself from the negatives of auto sweep. 

These are the things you must watch out for:

1. Interest Loss & Penalties for Early Withdrawal

When your FD (created through sweep-in) is broken early due to a sweep-in-out, you don’t get the full promised interest. You also get charges of 0.5% to 1% of that interest. This reduces your returns significantly.