It is a good way to park the cash you want to keep liquid. Some banks automatically create sweep FDs from the cash you have above a certain threshold. In HDFC you need to manually do a FD and then mark it as a sweep.
Whenever you make a payment and cash balance is not enough, the most recent sweep FD is broken but in multiples of Rs. 1.
Say you have a FD of Rs. 100000 for a 1 year maturity and you are into the 4th month. You now need to make a payment and an extra amount of 40000 is needed. HDFC will break this FD and 40000 + interest on this will be transferred to savings account to make payment. 60000 will remain in the same FD. Since 40k was broken before maturity, there will be an interest penalty. You will earn interest based on the current FD interest rate for 4 month maturity FD OR your original 1yr FD interest rate, whichever is lower. Plus an additional penalty of 1% from this lower rate.
HDFC allows premature partial breakup of FDs but this process is manual. With sweep this is automated.
Select a period which is short enough but still has a slightly higher interest rate. I usually opt for the 12 month or 15 month period.
"In the sweep-in facility, deposits are broken in units of Rs.1, minimizing your interest lost."
https://www.hdfcbank.com/personal/resources/learning-centre/save/what-is-sweep-in-facility-and-its-benefits
"In case of premature closure of Fixed Deposit (including sweep-in and partial) the interest rate will be 1.00% below the contracted rate or the rate applicable for the period the deposit has remained with the bank, whichever is lower, except for the tenure of 7-14 days and also for deposits >= ₹25 crore (single fixed deposit booked post 1 September, 2017)."
https://www.hdfcbank.com/personal/resources/learning-centre/save/how-to-partially-withdraw-funds-from-fixed-deposit
