Saving and Growing

With each passing day, despite promises to the contrary by government officials, any respite from high inflation appears a remote possibility. No wonder, the only way to survive is to tighten the purse strings while constantly scanning any opportunity to save.

The financial advisory space, too, is abuzz with recommendations to make investments that will beat inflation. However, amidst the plethora of glitzy and complex investment products, the simpler options are often given a miss.

Though there is no reason to ignore the advice from experts, it would also be worthwhile to look at the more humble, uncomplicated alternatives before setting your sights on the latest 'sophisticated' or 'customized' products.

To start with, you could delve into your safe or cupboard and take out the account-opening kit or any privileges/benefits manual from your bank, or simply, visit the bank's website. Several banks offer a feature that is often termed the sweep-in , sweep-out facilities to their account holders .

These are touted by banks as hybrid schemes combining the best features of a savings account and a fixed deposit. Essentially, these are projected as facilities that can make your idle cash work for you by fetching returns over and above the savings bank rate of 3.5% per annul.

However, the features are not always uniform across the banks, which means that you need to take a close look at the fine print before signing up for this facility. Here's what you need to know about sweep-in , sweep-out facilities to get the best out of them.

Typically, the amount not required by an individual in the foreseeable future is transferred to a fixed deposit or directed towards other investments. They generally keep a higher amount in their savings bank account than what may be required, as the tendency is to err on the safer side.

After all, nobody likes the idea of breaking a fixed deposit. At the same time, this concern over the possible penalty keeps them away from the returns they would have surely earned had the amount been directed to a fixed deposit instead.

This is where the sweep-in-sweep-out kind of facilities come in - banks promote this facility as a one-point solution for this dilemma . They ensure both liquidity and the scope to earn the rate of interest available to the bank's regular fixed-deposit holders.

Banks have been regularly making attempts to popularize this facility amongst their customers, resulting in some success . "Sweep-out contributes to around 10% to the total FDs booked in a month and Super Saver contributes to around 1% to the total FD base,"

Generally, when you decide to opt for the facility, a fixed deposit is linked to your savings account. You have to determine a threshold for the balance to be maintained in your savings account at all times. Any amount exceeding this limit then gets automatically 'swept out' to this fixed deposit.

However, depending on the bank and even the account type, there could be variations in the structure. "For instance, the bank could allow the customer to determine this limit as long as it is above a certain amount versus the limit being pre-fixed by the bank," says Harsh Roongta, CEO, Apnapaisa.com. "Also, the fixed deposits could be in bundles of say Rs 1,000 rather than a lump-sum deposit of the amount."

This apart, some facilities of this sort could allow the accountholder to determine the duration of the fixed deposit as against the tenure being decided by the bank.

Take, for instance, SBI's Savings Plus Account, where the accountholder can choose the tenure of the deposit from one year to five years. In contrast, Kotak Mahindra Bank's Activmoney facility works differently . Here, the balance above a threshold in the current/savings account is transferred to a term deposit with a 181-day-tenure . In case of insufficient funds in the current/savings account, funds in the term deposit are swept into the former. The sweep in/out has to be in units of Rs 10,000.