HDFC Bank - Fixed Deposit (FD) Sweep-in
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Can someone enlighten about this FD sweep-in facility from HDFC Bank :
What my RM explained sounded too good to be true and I literally couldn't find much information about it over the internet.
Not to confuse with auto sweep facility, in case of auto sweep, above a certain threshold amount, the remaining amount's FD is created automatically but in case of FD sweep-in, one has to create a FD and then choose to enabled sweep-in for it.
So, I'll tell you what my RM explained, let's say I've 3L in my savings account and I create FD of 3L for 15 months 1 day at interest of 7% p.a. and then enabled FD sweep-in. For sweep-in, I'll get a lesser interest, 6.5% p.a. and I've no idea if deducting 0.5% p.a. is the fixed norm or not. Say, I transact for Rs. 100 after 5 days of FD being created, it will be deducted/broken from FD amount and I'll get interest at 6.5% p.a. for 5 days, is that true?
I've several questions, someone who has used this first hand, please comment below.
If this scheme is as good as it sounds, it will be a great as FD rates are fairly decent currently and having liquidity as well as no premature withdrawal charges in addition to getting rates as promised (with a minor deduction of 0.5% p.a. from regular rate).
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it will be deducted/broken from FD amount and I'll get interest at 6.5% p.a. for 5 days, is that true? - He is right.
That's the benefit of sweep-in facility. It will keep on calculating the interest on your current FD balance. Also, until and unless you use your entire FD amount before it matures you won't be penalised as well. (This was the info given to me by my advisor)
I specifically said this to my RM that it sounds too good to be true. Found this on website :
For such nonsense, I'm better off parking my idle funds over 1 lac in Bandhan Bank savings account at 6% p.a.
Sweep in is not unique to HDFC...
Interest of 6.5% for 5 days is not true.
FD interest is based on number of days money is kept in FD. Eg you have created FD of 15 months at 7% interest, now say after 5 days some amount assume 1000 was sweep into linked saving amount...Than this 1000 rs will earn interest that is applicable for (5 days - 0.5 % penalty) or original Interest 7% - 0.5% which ever is lower... Amount still in FD continue to be under 7% interest
Sweep in amount is same as premature withdrawal with all penalty (which is on interest part)
Never go for such sweep in - out. At the last- Your pass book will be too messy. And actual interest will be too difficult to keep track on.
Sweep-in is same as liquidating an FD (partially or fully). The advantage HDFC is giving is that you can do a partial liquidation if you need only part of the FD amount. The amount of interest you will get on the liquidated amount will be based on the rate of interest at the time the FD was created minus 1 percent, minus TDS and will be calculated for the number of days the liquidated amount was kept in FD.
You can test this by clicking Liquidate FD in Netbanking and choosing a particular FD. Before you can click the confirm button, it will show you a page with all the details (rate of interest, interest amount, etc). Do not hit the confirm button!!!
 Sweep-in for Rs. at ){kind=link}
FD don't have flat rates.. FD rates are in the incremental fashion.. if you are getting 6.5% in 2 years..
So it will start with around 2.5% for the first 7-14 days and gradually increase to 6.5% at the end of your tenure..
So if you sweep fd after 5 days.. you might not get any interest or will get around 2.5%
If you don't have this facility of sweep in, they generally charge 1% of current interest rate as penalty.. if your FD is 6 months old and current rate in that fd is 4.5%.. they will give you interest at 3.5%