You want the liquidity of a Savings bank account but at the same time find its interest rate (4%) too low. What do you do? Some of you may take the middle way and transfer your account to a bank that offers a 6% (or 7%) interest on a savings bank account. For others, there’s a thing called ‘auto sweep’, as many private banks’ call it. In auto sweep, any amount over the limit (that you set) in your savings bank account will be automatically transferred to a fixed deposit, earning you higher interest. This rate can be (generally) any where between 7 to 9.5%, depending on the term of the fixed deposit. You will have the option to choose the term and get the interest rate applicable to that term.
SBI, the largest lender, also has this scheme. It calls it as a ‘Savings Plus Account’. This is nothing new; in fact, this scheme was introduced in late 2000 but as I see it, not many are aware of it.
At SBI, you can either directly open a Savings Plus Account, or simply convert your existing Savings account into a ‘Plus’ (for free). The minimum threshold you need to maintain in your savings plus account is Rs.5000. Above Rs.5000, starting from a minimum amount of Rs.10000 (and then in multiples of Rs.1000), all amount will be converted into a fixed deposit.
For example, you choose to set your threshold at Rs.10000, any amount that accounts to Rs.20000 (over all in your savings plus account) or over will be swept across in to fixed deposit. In simple words, apart from the threshold that you’ve set, you must have at least Rs.10000 to convert it into a fixed deposit. The term of this fixed deposit can be chosen by you and can be any where between 1 to 5 years. By default, this is selected as 1 year and if not changed by the customer, this will be auto-renewed for any another one year at the end of first year.
Do I get all the normal benefits of a Savings account?
Yes, you will have an ATM cum Debit card, a cheque book, a Passbook, Internet Banking account (if you request).
If I need to withdraw an amount that is over the available balance, can I do that?
Yes, if the available balance is less than what you need, the remaining will be taken out from the fixed deposit (last deposit first out and so on) until your required amount is met. And, you can do this using your ATM card itself.
Can I change the threshold limit?
Yes you can.
To whom is this most useful?
Obviously, to those who maintain large amount of balances in their savings accounts and do not use them for longer periods of time.