The auto-sweep option, offered by banks like SBI in India, allows for the combination of your savings account and fixed deposit account. Doing this allows you to earn interest on your savings and enjoy total liquidity at the same time. 

Explanation of SBI Auto Sweep Facility 

The SBI Auto Sweep functionality helps you grow your savings by maximising your interest earnings. It works like this: 

  1. Connect your accounts: Link your savings account with a fixed deposit to enhance your financial growth. 
  2. Establish a limit: Specify the amount you want to hold in your savings. 
  3. Transfer automatically: Any funds that exceed your specified savings limit will be automatically allocated to your fixed deposit. 
  4. Restore balance: When your savings reach a lower level, funds will be transferred from your fixed deposit to top off the account. 

How Does Auto Sweep Work? 

Start by deciding a limit for your savings account. When your balance exceeds this limit, the surplus automatically shifts to your fixed deposit. This method is called a "sweep-in," and both accounts will earn interest. You can still access the extra funds. If your savings account doesn't have enough, we move money from the fixed deposit to help with your withdrawal. 

Here's an example: 

You open a savings account with auto sweep where the minimum balance is ₹5,000. If you deposit ₹25,000 and establish a limit of ₹10,000 for the savings account (inclusive of the minimum balance of ₹5000), the excess amount of ₹15,000 will be automatically transferred to your fixed deposit, allowing both accounts to accrue interest. In case you withdraw ₹7,000 from the FD amount, the interest on the fixed deposit will be based on the remaining ₹8,000. 

Reverse Scenario: 

If you have ₹15,000 in your savings account and you withdraw the full ₹15,000, the auto-sweep facility will transfer funds back from the FD to the savings account to ensure you can make the withdrawal. In this case, the interest on the FD will be recalculated based on the remaining balance in the FD after the reverse sweep. 

The interest rate applicable to SBI's sweep-in fixed deposits is based on the prevailing FD interest rates. 

How to Activate Auto Sweep in SBI 

Setting up auto sweep typically involves a similar process across multiple banks. Below is a quick overview of the SBI auto-sweep process:  

  1. Go to SBI's online banking. Fill in your username, password, captcha, and OTP. 
  2. Click on "Deposits and Investments." Then choose "Deposits." 
  3. Select "Auto Sweep Facility." 
  4. Check your account details. Click "Continue." 
  5. Enter the security password sent to your phone. Click "Confirm." 
  6. Set up auto sweep. Choose the frequency (monthly or weekly), start date, limit, and the amount you wish to keep in your savings account. 

Auto sweep starts immediately when your savings account reaches the specified limit, while the "resultant balance" is the sum you keep in your account. 

Benefits of Auto Sweep Facility 

The auto sweep option is packed with advantages for those wanting to enhance their savings and secure increased returns.  

1. Enhanced Liquidity: 

  • Instant Access: Withdrawals from your savings account can be made at any time, guaranteeing liquidity for your day-to-day expenses. 

  • Emergency Fund: The facility acts as a safety net, providing ready access to funds during unexpected financial situations. 

2. Higher Interest Rates: 

  • Fixed Deposit Rates: Moving funds to your fixed deposit account results in better interest rates than those provided by savings accounts. 

  • Maximised Returns: Automatically transferring surplus funds allows you to benefit from the potential for increased returns in the long run. 

3. Automated Savings: 

  • Disciplined Savings: By consistently shifting funds into your fixed deposit, the auto sweep feature lets you build a disciplined saving routine. 

  • Goal Achievement: It serves as an effective tool for establishing a financial cushion, saving for particular goals, or building an emergency fund. 

4. Flexibility: 

  • Customisation Options: You can customise the threshold amount, sweep frequency (weekly or monthly), and maturity period of your fixed deposits to align with your financial needs. 

  • Multiple Accounts: The facility lets you link multiple savings accounts to one fixed deposit account, providing enhanced flexibility in managing your finances. 

5. Convenience: 

  • Automated Process: With the auto sweep option, you can avoid manual transfers, which saves you both time and effort. 

  • Online Access: Many banks offer web-based platforms to monitor and control your auto sweep facility, providing you with convenience and easy access. 

6. Risk Mitigation: 

  • Diversification: By spreading your funds across savings and fixed deposit accounts, you can diversify your investments and mitigate risks associated with market fluctuations. 

  • Stability: The fixed deposit component offers a relatively stable and secure investment option. 

Taxes on Auto Sweep 

Interest generated from your savings account with auto sweep is considered regular income and is taxable. If you earn more than ₹10,000 in interest in a financial year, a 10% TDS will be deducted. 

For the fixed deposit linked to your auto sweep, the interest is treated as income from other sources. TDS is not deducted automatically, so you must include this income in your income tax return. 

FAQs on SBI Auto Sweep

1. Is auto sweep available in SBI?

Yes, SBI offers an auto sweep facility for its savings account holders. The Auto Sweep facility allows the automatic transfer of funds from the savings account to a fixed deposit (FD) when the balance exceeds a certain threshold limit. This helps in earning higher interest on the surplus amount while maintaining liquidity, as the amount in the FD can be accessed when needed. The funds are swept back into the savings account when the balance falls below the specified limit. This facility is available on select types of accounts, such as the SBI Smart or SBI Advantage Savings Accounts.

2. How does auto sweep work in SBI? 

SBI's auto sweep function seamlessly transfers surplus funds from your savings account to an associated fixed deposit account once your balance exceeds a predetermined threshold. This feature allows you to benefit from higher interest rates while maintaining easy access to your money. 

3. What is the required threshold amount for the SBI auto sweep? 

The auto sweep feature from SBI requires a minimum threshold balance of ₹35,000. If your savings account balance goes beyond this amount, the additional funds will be automatically transferred to your linked fixed deposit account. 

4. What are the disadvantages of auto sweep in SBI?

The disadvantages of the Auto Sweep facility in SBI include the possibility of lower liquidity, as funds are automatically transferred to Fixed Deposits (FDs) for higher returns and may not be easily accessible in emergencies. There are also penalties for premature withdrawal of the FD, which reduces the overall interest earned. Additionally, the sweep threshold can limit the flexibility of account holders who prefer to maintain a higher balance in their savings account. Lastly, interest rates on the linked FDs may not be competitive in certain cases, making the returns less attractive.

5. Is auto sweep better than FD?

An Auto Sweep facility is generally better than a Fixed Deposit (FD) for individuals seeking flexibility. With Auto Sweep, your savings in a regular savings account are automatically transferred to a fixed deposit once the balance exceeds a certain limit. This allows you to earn higher interest rates like a fixed deposit while retaining liquidity, as funds can be easily withdrawn if needed. In contrast, FDs have a fixed tenure, and withdrawing before maturity may incur penalties. Therefore, Auto Sweep offers a balance between earning interest and flexibility, making it more suitable for those who require easy access to their funds.

6. Is withdrawal permitted from my auto sweep account? 

Yes, it is possible to withdraw money from your auto sweep account. However, this could trigger a reverse sweep, causing funds to move from your linked fixed deposit account back to your savings account.