What is Auto Sweep in your Bank Account?

by Manshu on November 10, 2011

in Fixed Deposits

A lot of banks offer a feature where they automatically move money from your savings account to a fixed deposit if your balance goes over a certain threshold. This is known as the auto sweep facility.

Banks have different names for the auto sweep facility, and this site has a list of banks that offer the auto sweep facility along with their names.

Manish has already written a very comprehensive post on auto sweeps, and with over 200 comments it does a good job in explaining the nuances of the scheme.

The basic idea behind auto sweep is that banks allow you to take advantage of the money lying “idle” in your account by giving you a facility where they automatically move money from your savings account to a fixed deposit of a certain maturity like 180 days, and then pay you a higher interest on that part of the money that’s in the fixed deposit.

I see that Axis bank calls this scheme Encash 24 and they automatically create a fixed deposit of 180 days if your balance goes over a threshold.

Currently, the savings account rate is 4% and the 180 day rate is 7.5%, so you stand to gain the difference of 3.5% from their auto sweep facility.

I haven’t seen a bank charge for this, and some banks reduce the interest they give you by a percentage if you break the fixed deposit before the maturity, but that is still one or two points higher than what you would have gotten otherwise.

Like I said in the post about the highest savings account interest rate – the extra interest income you make on this should not be big enough to make a meaningful difference to your overall returns and you shouldn’t spend too much time worrying about this.

Instead, if you do indeed find that a lot of your money moves from savings to fixed deposit or that you have money lying in your savings account that you don’t often use then just create a special fixed deposit in one of the high interest rate banks and really put it to work.

{ 8 comments… read them below or add one }

Vijay November 12, 2011 at 10:58 PM

I feel that among the banks offering this facility, SBI should occupy a prominent place as they offer it to their clients without much hassles. Take the case of ICICI – for all practical purposes, they have discontinued this facility and are providing it only to ‘HNI’ account holders!!! I also feel that as part of fiscal discipline, it is a good strategy to link ones’ salary account to a Sweep in account. The issues which require greater clarity, as pointed out in the links, are
1.Whether Simple or Compound Interest is provided for the amount which has been swept in
2.The clear cut differences between the ‘Swept in’ FD and actual FD – as if there were no differences, anyone would opt for the former as it is a ‘Flexi Deposit’ which allows one to earn FD rates and provides easy liquidity as well
Can you help Manshu?

Reply

Manshu November 13, 2011 at 8:42 PM

The big difference to me is that when you open a FD you choose the best term which is usually something like 444 days or 1000 daysor something like that. When you auto sweep you will usually get a much lower rate because you will get a term of 180 days or 1 year with the lower interest rate. If you have money for a FD then select the best maturity and also don’t ask them to auto renew. When they auto renew you will most likely shift to a term with lower rate (not the special rate)

Reply

Ashok November 20, 2011 at 6:38 PM

As far as I know, ICICI bank does not offer this facility any more. In the comments section of the article quoted above (the JagoInvestor link), there is a lot of confusion regarding whether ICICI still offers it or not. Some people have written that it still exists for old accounts.

ICICI also did not offer this facility if your account was the one linked to ICICIDirect. I used to have a salary account and a “normal” savings account (for ICICIDirect purposes). They used to give the Sweep-In/Out facility only on the salary account. I closed the salary account in 2007 and I guess this facility is also removed now.

Also HDFC does not offer this on the salary accounts. You need to open a Savings Max account separately.

Reply

Gourab January 16, 2012 at 8:42 PM

Hi Krishna/Any learned person,
when I will try to withdraw a amount from ATM higher than cut off amount(amount lying in savings ac), Can I perform that transaction..?
Or I need to visit the bank & follow the traditional procedure to encash the money deposited as “Fixed” amount…

Kindly let me know…..

Reply

Murli August 18, 2012 at 2:00 PM

wheteher simple or compound interest id provided ??
and how calculation is made?? within how much intervals the interest is provided???

Reply

Murli August 18, 2012 at 2:01 PM

Simple Int or compound int??
and how calculation is made?? within how much intervals the interest is provided???

Reply

SARVESHWER BANG March 11, 2018 at 6:05 PM

in my bank ac auto sleep
from interest of auto sleep count as saving ac interest under SEC 80TTB
i am senior citizen this interest allow up to rs 50000/-
REGARDS
S. BANG

Reply

SARVESHWER BANG March 11, 2018 at 6:08 PM

MY SAVING AC IN YES BANK AND INTEREST IS 6%
THIS INTEREST EXEMPT UNDER SEC 80TTB
S. BANG

Reply

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