Most people deposit their capital in savings accounts in banks, but most of the leading banks give interest at the rate of 2.7-4 percent. How much interest will be received, it depends on the amount deposited. Some banks also offer interest at the rate of 6 per cent to encourage you to keep more capital in the account. The biggest advantage of depositing money in a savings account is liquidity and the money kept in it can be withdrawn at the time of need. However, it has now become possible in most of the banks to deposit the money kept in the savings account in the bank and can also withdraw it at the time of need. For this, you have to open a sweep-in account instead of a normal savings account. In this, the deposit amount gets interest at higher rates than the savings account and can also be withdrawn at the time of need.
You will get interest at the rate at which interest is earned on FD in sweep-in account and same as Liquidity Savings Account i.e. in this account you get the benefit of both FD and Savings Account. In the sweep-in account, when the savings account balance exceeds a certain limit, the excess money becomes FD. According to Adil Shetty, CEO, BankBazaar.com, it can be ensured that money does not remain in the savings account, but it can also get better interest.
This is how a sweep-in account works
If you have 1.2 lakh rupees in your savings account, then you can keep 20 thousand rupees in the savings account and get an FD of 1 lakh rupees. If you need more than 20 thousand rupees, then you can withdraw money from the FD account and after withdrawal, the amount remaining in the FD will get interest at the rate prescribed for the FD.
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It is important to take care of these things
Not all banks provide this facility to their customers and those who do, they also have some conditions related to it. According to Shetty, most banks have the facility to open an auto-sweep savings account, but before opening it, check the minimum monthly balance (MAB) and threshold limit. Threshold limit means the limit above which the amount will become FD. The MAB and threshold limits are different for each bank. Some banks have MAB of 25 thousand rupees and some others 50 thousand rupees.
Another situation can be created that a bank has fixed MAB of 40 thousand rupees and threshold FD of 10 thousand rupees, then if there is 1 lakh rupees in the savings account, then 60 thousand rupees will automatically become 6 FDs of 10-10 thousand rupees. . According to Shetty, now if you need money, then money will be withdrawn from the savings account and if the minimum balance is not maintained from it, then the amount which is getting reduced, it will be transferred from FD to savings account.
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In this situation it is better to keep money in the savings account itself.
Sweep-in account offers features of both savings account and FD, but despite this, it is not so that it proves to be better in all respects. According to Shetty, if you make frequent withdrawals from FD, then interest will not be available and it will not make any difference to the amount in the account. According to Shetty, this is because the interest is calculated on the basis of how many days the money is kept in the FD. In such a situation, if an FD was done for one year, but if you are withdrawing money within 445 days, then interest will be available only for 45 days. Apart from this, if you keep money in the account for less than 30 days, then interest will be available on this FD at low rates. This means that the sweep-in account is beneficial only if the FD tenure is more than 30 days and if this is not the case, according to Shetty, it makes sense to keep the money in the savings account itself.
(Article: Sunil Dhawan)