Auto Sweep Facility from SBI

Hema Kulkarni

KF Mentor
Has anyone opted for Auto Sweep Facility from SBI, also called Multi Option Deposit Scheme (MODS). Wanted to understand Cons of this scheme before opting for it
 
SBI's auto sweep facility, or MODS, is a facility that is provided for fixed deposits where you can withdraw or transfer money from them at any time without a penalty. However, there are a few cons to this scheme that you must know before enabling it:

  1. Lower interest rates than normal fixed deposits.
  2. SBI will charge a penalty if you want to break your FD (0.50% penalty if your total FD amount is less than 5 lakhs and 1% penalty if the FD amount is more than 5 lakhs).
  3. If you take out your money within a few days, then auto sweep facility is not recommendable and is not beneficial in every case.
I can suggest a good video that will help you understand it better.

link of the video - > ***********.youtube.com/watch?v=4NotJxv60Og?feature=shared
 

ShavirB

Founder
Staff member
Hi Guys, Here is a Detailed Review of both how Auto Sweep Facilities and Auto Sweep Facility in SBI. Hope this helps

Auto Sweep Facility Explained || Auto Sweep Facility in SBI Detailed Review 2024

Most of us have heard that earning 7-8% interest on your Savings Account is quite easy - just set up a Sweep Facility in your Savings Account, and your money will automatically shift to a Fixed Deposit (FD). You'll start earning FD interest on that money.

But what if I tell you that this is only half true? There are many aspects to this that often go unmentioned, and it's possible that by using this Sweep-In Facility, you might actually earn less interest in your Savings Account. Surprised?

As you probably know, the interest rate on FDs depends on how long you keep your money locked in - generally, longer-term FDs offer better rates. But in the Auto-Sweep facility, you typically get a 1-year FD rate - some banks offer the option to choose the tenure, but most banks keep it fixed.

But what if the money from your Savings Account gets swept out into the FD account, and you need that money before a year? In this case, some banks impose penalties, while others don't.

It's important to note that in some buckets, the FD rates offered by banks can be lower than the Savings Rate. For example, in IDFC, the Savings Rate is normally between 4-6%, and if you look at their FD rates, you'll find that in some buckets, these rates are even lower than 4%.

So, in this case, if you opt for the Auto-Sweep facility and withdraw your money within 29 days, you could potentially end up losing out.

Now let's take a look at how SBI's Auto Sweep Facility works. In SBI, the Auto Sweep Facility is known as the "MODS" - Multi Option Deposit Scheme.

First, let's see who is eligible for this facility. SBI doesn't clearly state the eligibility criteria, but the truth is that anyone with an SBI Savings or Current Account can avail of this facility. You can activate this facility online or offline, from anywhere.

Currently, SBI offers a Savings Rate of around 2.75%, and FD rates are more than 2.75% in all the buckets. So, it seems like a sensible choice to opt for this facility.

In MODS, you can sweep-in or sweep-out money in multiples of 1,000, which is convenient. This flexibility allows you to manage smaller amounts effectively. For SBI's Auto Sweep Facility, the Threshold Limit is 35,000, and you'll need to create a minimum FD of 10,000 to activate this facility.

This means that as soon as your Account Balance crosses 35,000, you'll reach the threshold limit, and your first FD of 10,000 will be created. Once the Account Balance reaches 45,000, a 10,000 FD will immediately sweep out. After that, as your account balance reaches 36,000, another 1,000 FD will sweep out. This process will keep repeating.

SBI gives you the option to choose the tenure for your FD, ranging from 1 year to 5 years.
  • However, there's a major downside to SBI's Auto Sweep facility - if you break any of your FDs, meaning you move the money back to your account ("SWEEP-IN"), you'll incur a penalty.
If you withdraw the money within 7 days, you'll earn zero interest. If your total FD amount is less than 5 lakhs, you'll face a 0.50% penalty. Let's understand this better.

NdvRLkyJ5IIYdKY_mFohTe-Yp6WX5apOYyaJ5CHq85Ag9h4zj1vgxE_ZGcE1CZXVEJVkrhSS_KXnUcJGAEx4apXKoTccWbNttznS09sMWTbjZleSxruRBW-RfsTNt2vfHoDCYo2tOFiDGO2zpKEMTuw


Suppose you've chosen a 1-year tenure for all your SWEEP-IN FDs. If you break any FD before 1 year, you'll earn 0.50% less interest on that amount. So, according to this chart, if you break your FD after 175 days, you'll only earn 4.00% (4.50%- 0.50%). If your total SWEEP-IN FDs amount to more than 5 lakhs, you'll face a 1% penalty.
  • This means that if your SWEEP-IN FD exceeds 5 lakhs, and you withdraw the money within 40 days, you'll only earn 3.00% - 1.00%, which is just 2.00% interest on that money - even less than the Savings Interest.
So, SBI's Auto-Sweep facility isn't beneficial for everyone. You need to consider these factors before using it.

But in this discussion, we've missed an essential point - taxation.

Savings Account Interest Income is eligible for a tax deduction of up to 10,000 under Section 80 TTA. But there's no such benefit for FD interest. FD interest is taxed like regular income, which could be 10%, 20%, or 30%.

So, considering the tax component, our calculations might change. If you fall into the 20% tax bracket and withdraw your money from the FD within 179 days, you'll earn 4.00% interest ( (4.50%- 0.50%). And this 4.00% will also be subject to a 20% tax. So, your effective interest rate will be 3.20%, which is less than the Savings Interest Rate of Most Banks.
 
Hi Guys, Here is a Detailed Review of both how Auto Sweep Facilities and Auto Sweep Facility in SBI. Hope this helps

Auto Sweep Facility Explained || Auto Sweep Facility in SBI Detailed Review 2024

Most of us have heard that earning 7-8% interest on your Savings Account is quite easy - just set up a Sweep Facility in your Savings Account, and your money will automatically shift to a Fixed Deposit (FD). You'll start earning FD interest on that money.

But what if I tell you that this is only half true? There are many aspects to this that often go unmentioned, and it's possible that by using this Sweep-In Facility, you might actually earn less interest in your Savings Account. Surprised?

As you probably know, the interest rate on FDs depends on how long you keep your money locked in - generally, longer-term FDs offer better rates. But in the Auto-Sweep facility, you typically get a 1-year FD rate - some banks offer the option to choose the tenure, but most banks keep it fixed.

But what if the money from your Savings Account gets swept out into the FD account, and you need that money before a year? In this case, some banks impose penalties, while others don't.

It's important to note that in some buckets, the FD rates offered by banks can be lower than the Savings Rate. For example, in IDFC, the Savings Rate is normally between 4-6%, and if you look at their FD rates, you'll find that in some buckets, these rates are even lower than 4%.

So, in this case, if you opt for the Auto-Sweep facility and withdraw your money within 29 days, you could potentially end up losing out.

Now let's take a look at how SBI's Auto Sweep Facility works. In SBI, the Auto Sweep Facility is known as the "MODS" - Multi Option Deposit Scheme.

First, let's see who is eligible for this facility. SBI doesn't clearly state the eligibility criteria, but the truth is that anyone with an SBI Savings or Current Account can avail of this facility. You can activate this facility online or offline, from anywhere.

Currently, SBI offers a Savings Rate of around 2.75%, and FD rates are more than 2.75% in all the buckets. So, it seems like a sensible choice to opt for this facility.

In MODS, you can sweep-in or sweep-out money in multiples of 1,000, which is convenient. This flexibility allows you to manage smaller amounts effectively. For SBI's Auto Sweep Facility, the Threshold Limit is 35,000, and you'll need to create a minimum FD of 10,000 to activate this facility.

This means that as soon as your Account Balance crosses 35,000, you'll reach the threshold limit, and your first FD of 10,000 will be created. Once the Account Balance reaches 45,000, a 10,000 FD will immediately sweep out. After that, as your account balance reaches 36,000, another 1,000 FD will sweep out. This process will keep repeating.

SBI gives you the option to choose the tenure for your FD, ranging from 1 year to 5 years.
  • However, there's a major downside to SBI's Auto Sweep facility - if you break any of your FDs, meaning you move the money back to your account ("SWEEP-IN"), you'll incur a penalty.
If you withdraw the money within 7 days, you'll earn zero interest. If your total FD amount is less than 5 lakhs, you'll face a 0.50% penalty. Let's understand this better.

NdvRLkyJ5IIYdKY_mFohTe-Yp6WX5apOYyaJ5CHq85Ag9h4zj1vgxE_ZGcE1CZXVEJVkrhSS_KXnUcJGAEx4apXKoTccWbNttznS09sMWTbjZleSxruRBW-RfsTNt2vfHoDCYo2tOFiDGO2zpKEMTuw


Suppose you've chosen a 1-year tenure for all your SWEEP-IN FDs. If you break any FD before 1 year, you'll earn 0.50% less interest on that amount. So, according to this chart, if you break your FD after 175 days, you'll only earn 4.00% (4.50%- 0.50%). If your total SWEEP-IN FDs amount to more than 5 lakhs, you'll face a 1% penalty.
  • This means that if your SWEEP-IN FD exceeds 5 lakhs, and you withdraw the money within 40 days, you'll only earn 3.00% - 1.00%, which is just 2.00% interest on that money - even less than the Savings Interest.
So, SBI's Auto-Sweep facility isn't beneficial for everyone. You need to consider these factors before using it.

But in this discussion, we've missed an essential point - taxation.

Savings Account Interest Income is eligible for a tax deduction of up to 10,000 under Section 80 TTA. But there's no such benefit for FD interest. FD interest is taxed like regular income, which could be 10%, 20%, or 30%.

So, considering the tax component, our calculations might change. If you fall into the 20% tax bracket and withdraw your money from the FD within 179 days, you'll earn 4.00% interest ( (4.50%- 0.50%). And this 4.00% will also be subject to a 20% tax. So, your effective interest rate will be 3.20%, which is less than the Savings Interest Rate of Most Banks.
There are some query
1. Can we check the statement of autosweep fd whole statement
2. In Sbi is it compulsory to start with 10000 first autosweep.
3.lets suppose I opt for auto sweep facility someday my account balance become 47000 then how much amount of auto sweep will be created.
4 Can we choose the time interval for every auto sweep
 
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