As savings account interest rates decline, sweep-in fixed deposits are emerging as a smart strategy for maximising returns without compromising liquidity. By linking your savings account with a fixed deposit, sweep-in facilities automatically transfer surplus funds above a set threshold into an FD that earns higher interest—while still allowing quick access when needed.
The mechanism is simple: once your savings account balance exceeds a defined limit, the excess is “swept” into an FD. If your account falls below that limit, funds are seamlessly transferred back from the FD. This way, you earn more on idle funds without sacrificing accessibility.
For example, if you maintain a ₹5 lakh savings account balance, earning just 2.75% interest, you could earn significantly more by sweeping ₹4.75 lakh into an FD offering 5.5% interest. This can lead to an additional interest gain of over ₹13,000 annually—without locking your money away.
Experts advise setting an appropriate sweep threshold to avoid frequent transactions and checking for any charges or premature withdrawal penalties. Liquidity remains intact, and the facility combines the interest of a fixed deposit with the flexibility of a savings account.
Several banks and small finance banks (SFBs) also offer high interest on savings accounts, but rates may only apply to specific balance slabs. Depositors with large surplus funds may benefit by diversifying across multiple banks offering competitive slab-based interest rates.