What is sweep facility in bank?
1) The sweep facility is provided by banks to combine the benefit of liquidity offered by a savings account with higher returns provided by a fixed deposit (FD).
2) Investors can open a savings account and have a fixed deposit linked to it or vice versa, that is, open a fixed deposit and link it to a savings account.
3) The funds that exceed a specified amount are automatically shifted to the FD once the account holder specifies his requirement at the time of signing for the facility.
4) If the savings account has less funds than are needed for transactions, these are moved from the FD. The most recent FD is usually broken to replenish the savings account.
5) If the fixed deposit is not accessed for shifting funds to the savings account, it continues to earn a higher interest.
6) Some banks may specify the minimum lots in which such sweep-ins are allowed. Others may allow such conversion even in multiples of Rs 1.
Source: Economic Times
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