{"id":6385,"date":"2024-08-18T17:55:21","date_gmt":"2024-08-18T12:25:21","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=6385"},"modified":"2025-01-07T12:26:59","modified_gmt":"2025-01-07T06:56:59","slug":"auto-sweep-facility-banking-quick-explainer","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/","title":{"rendered":"Auto Sweep Facility"},"content":{"rendered":"<p>Auto sweep facility is a feature of bank accounts that helps the account holder automatically save money.<\/p>\n<p>It links a bank account and a fixed deposit in such a way that any time your savings account balance exceeds a certain amount, the extra money is swept into a fixed deposit account.<\/p>\n<p>Let&#8217;s dive into this tell-all piece about the auto sweep, simplify some jargon, and learn how this facility works for you.<\/p>\n<p style=\"text-align: left;\"><strong>Read more: <\/strong><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/business-bank-account-checklist\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\"><strong>Business Account Checklist: Meaning, Types and Features<\/strong><\/a><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e00859bfc7b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e00859bfc7b\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#What-is-Auto-Sweep-Facility\" >What is Auto Sweep Facility?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#How-Does-the-Auto-Sweep-Facility-Work\" >How Does the Auto Sweep Facility Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#How-to-Activate-Auto-Sweep-Facility\" >How to Activate Auto Sweep Facility?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#Auto-Sweep-Jargon-Explained\" >Auto Sweep Jargon Explained<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#Benefits-of-Auto-Sweep-Facility\" >Benefits of Auto Sweep Facility<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#1-Higher-FD-Rates\" >1. Higher FD Rates<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#2-Liquidity\" >2. Liquidity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#3-Flexibility\" >3. Flexibility<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#4-Linking-Multiple-Deposits\" >4. Linking Multiple Deposits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#5-Separate-Corpus\" >5. Separate Corpus<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#Taxes-on-Auto-Sweep-Facility\" >Taxes on Auto Sweep Facility<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#Summing-up\" >Summing up<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#Automated-Banking-and-Finance-Management\" >Automated Banking and Finance Management<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/auto-sweep-facility-banking-quick-explainer\/#Frequently-Asked-Questions\" >Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-Auto-Sweep-Facility\"><\/span><b>What is Auto Sweep Facility?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Auto sweep facility allows account holders to move surplus funds from a savings account to a Fixed Deposit, and access these funds at any time without any lock-in period or penalties.<\/p>\n<p>When the balance in your account falls below the stipulated threshold, the amount of the shortfall flows back into your account. This is called<b> sweep-in.<\/b><\/p>\n<p>This process of sweeping the money into or out of your account happens at the end of each working day &#8211; ensuring that the optimum balance is maintained in your account. At the same time, all your excess cash gets the highest return from a safe fixed deposit.<\/p>\n<h2 style=\"text-align: left;\"><span class=\"ez-toc-section\" id=\"How-Does-the-Auto-Sweep-Facility-Work\"><\/span><b>How Does the Auto Sweep Facility Work?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Auto sweep facility needs to be enabled on your savings account. Once enabled, you will need to specify a threshold limit. When the balance in your account exceeds this threshold the surplus will be automatically transferred to a FD account. This is called a\u00a0<strong>sweep-in.\u00a0<\/strong><\/p>\n<p>The auto sweep facility does not affect your liquidity. If you try to make a transaction valued higher than your specified threshold, funds will be <strong>swept-out<\/strong> from your FD back into your savings account for your use.<\/p>\n<p>In this way, you can earn interest on your money in both the FD and savings accounts.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How-to-Activate-Auto-Sweep-Facility\"><\/span>How to Activate Auto Sweep Facility?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>You can activate auto sweep facility both online and in-person. Before raising the request, make sure you have planned your threshold limit and budgets well.<\/p>\n<p>For online activation, login to your mobile app or your internet banking portal.<\/p>\n<p>You may also speak to customer service agents of your bank of choice. Once the service request is raised, it may take up to 1-2 days for the facility to get activated on your savings account.<\/p>\n<p>For an in-person process, you can visit the nearest bank branch and raise a request for auto sweep facility to be enabled.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Auto-Sweep-Jargon-Explained\"><\/span><b>Auto Sweep Jargon Explained<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Here are a few terms you should be familiar with before availing of the auto sweep facility:<\/p>\n<ul>\n<li aria-level=\"1\"><b>FD tenure\/period:<\/b> It is the duration of the fixed deposit, that is, the time for which the FD has been created. Banks might offer only a 1-year deposit as part of the auto sweep facility. Some banks, however, provide a flexible tenure for Fixed Deposits.<\/li>\n<li aria-level=\"1\"><b>LIFO\/FIFO: <\/b>The excess amount swept out of your account is invested in FD units, each of them typically broken into small denominations. The bank may follow the FIFO (First In First Out) method or the LIFO (Last In First Out) method to liquidate FD units to maintain the stipulated balance in your account.In the LIFO system, the bank will liquidate the FD units invested in which you invested most recently, and the amount will be transferred to your account. The bank will liquidate the FD units created the earliest in the FIFO system.<\/li>\n<li aria-level=\"1\"><b>Pre-closure penalty: <\/b>The penalty charged for withdrawing from a Fixed Deposit before its term has expired.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Benefits-of-Auto-Sweep-Facility\"><\/span><b>Benefits of Auto Sweep Facility<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Whether you are a business owner using a current account or a salaried individual using a savings account, there are benefits aplenty to enabling the auto sweep facility.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"1-Higher-FD-Rates\"><\/span><b>1. Higher FD Rates<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The main reason to opt for the auto sweep facility is to earn interest on money in your account. To get a better understanding of your expected earnings, you could even use an FD interest calculator.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"2-Liquidity\"><\/span><b>2. Liquidity<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The sweep facility enables you to have ample liquidity while ensuring a good return on your funds. Say you have an EMI pending or a <a href=\"https:\/\/razorpay.com\/learn\/what-is-cheque\/\">cheque<\/a> due and are running low on funds in your sweep current account. Your bank will automatically transfer the funds from the amount invested earlier to your account to ensure timely payment of the EMI or the cheque, saving you time and effort.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"3-Flexibility\"><\/span><b>3. Flexibility<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Banks generally let you choose the period of the deposit, the maturity, and the threshold amount. There may, however, be a minimum holding period for FDs, and premature withdrawal may lead to loss of interest.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"4-Linking-Multiple-Deposits\"><\/span><b>4. Linking Multiple Deposits<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>You can link multiple deposits to the current account for sweep-in to ensure you never have a liquidity crunch. In such cases, banks usually apply the LIFO (Last in First Out) rule, which means that,\u00a0 when a sweep-in is triggered,\u00a0 funds will be transferred to your account\u00a0from the latest deposit linked to the sweep-in facility.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"5-Separate-Corpus\"><\/span><b>5. Separate Corpus<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Apart from the higher interest rate, the sweep-in facility helps you create a corpus that you can access in an emergency, without having to liquidate any other asset.<\/p>\n<p style=\"text-align: center;\"><strong>[Read more: <\/strong><a href=\"https:\/\/razorpay.com\/learn\/6-differences-between-current-account-and-savings-account\/\"><strong>Differences Between a Current Account and a Savings Account]<\/strong><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Taxes-on-Auto-Sweep-Facility\"><\/span>Taxes on Auto Sweep Facility<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p data-sourcepos=\"1:1-1:108\">Interest earned on savings account where auto sweep facility is enabled is categorised as ordinary income and TDS of 10% is deducted if the interest exceeds Rs 10,000 in a year.<\/p>\n<p data-sourcepos=\"3:1-3:214\">The FD account linked through the auto sweep facility will also provide interest &#8211; this is taxable as income from other sources, where TDS is not auto-deducted but will have to be declared in income tax returns.<\/p>\n<p data-sourcepos=\"7:1-7:151\">The tax implications of auto sweep facility can be complicated, so it is important to consult with a tax advisor to understand your specific situation.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Summing-up\"><\/span>Summing up<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If you want to save money, maintain a robust balance in your current or savings account and stay on top of your finances without having to tinker with your bank account every single day, then the auto sweep facility is the way to go.<\/p>\n<p><b>Read more<\/b><strong>:<\/strong><a href=\"https:\/\/www.rbi.org.in\/commonman\/English\/Scripts\/PressReleases.aspx?Id=3243#:~:text=The%20facility%20to%20set%2Fmodify,to%20LAF%20and%20MSF%20operations.\" target=\"_blank\" rel=\"noopener\"><strong> RBI on A<\/strong><b>uto Sweep Facility<\/b><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Automated-Banking-and-Finance-Management\"><\/span>Automated Banking and Finance Management<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The auto sweep facility is only one example of how automation is a game changer for finance. If you can&#8217;t make computers do your work for you, what&#8217;s the point of living in the 21st century?<\/p>\n<p>RazorpayX is a business banking suite that offers automations, integrations and more so you can bank like the future.<\/p>\n<ul>\n<li>Cut manual effort and mistakes with automated payouts, taxes and more<\/li>\n<li>A current account now directly integrated with your favourite accounting software<\/li>\n<li>Smart bulk payouts so you don\u2019t have to worry about any missed payments<\/li>\n<li>Vendor management, payroll management \u2013 all in one place<\/li>\n<li>AI-driven financial insights with RazorpayX smart dashboard<\/li>\n<\/ul>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/current-accounts\/?r=blog_cta_ca_auto_sweep_facility&amp;utm_source=organic\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">RazorpayX FREE Demo<\/a><\/div>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently-Asked-Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\t\t\t<div id=\"rank-math-rich-snippet-wrapper\" class=\"\">\n\n\t\t\t\t\n\t\t\t<\/div>\n\t\t\n","protected":false},"excerpt":{"rendered":"<p>The auto sweep facility helps you earn interest on the idle funds in your bank account by transferring them to a high-interest deposit.<\/p>\n","protected":false},"author":151156539,"featured_media":12704,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437],"tags":[3619,3581],"class_list":{"0":"post-6385","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking","8":"tag-auto-sweep-facility","9":"tag-business-banking"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/6385","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156539"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=6385"}],"version-history":[{"count":15,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/6385\/revisions"}],"predecessor-version":[{"id":15324,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/6385\/revisions\/15324"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/12704"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=6385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=6385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=6385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}