Read up about FD sweep ins in HDFC. It comes in handy when you have all money invested in FDs but have to make some big urgent payment. So if you break your FD you will lose interest and get a small penalty. Hence FD sweepins are an easy alternative and they clearly claim there is no loss in Interest Rate. So my question.... Have you ever used HDFC Sweep In facility? If so what are the draw backs feels a bit too good to be true...
If we have an IPO mandate and don't have sufficient funds in account, will sweep in work for this as well?
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
Hmmm got it, so penalty is still applicable but just on the amount deducted instead of complete FD.. In other words like you mentioned it's just like an automated partial fd breakup.
Thanks. Though 1 question remains, will this be applicable to IPO mandates? I mean if I set up an IPO mandate and there are no funds in Savings account, even during this time will it deduct from SweepIns?
yes, even for IPO mandates, it will work
As u guys know only 5L is insured, I want to know how much you’re comfortable keeping in account? Maybe someone’s living expense could be 10L a year and they are okay with keeping that as emergency fund liquid, just an instance. But give...
At least 3 months of expenses, plus some emergency funds. Unless you have an account in some obscure small bank, don...
I keep my savings in a bank account with a very average annual return. Shall I start to keep my savings in a low duration Debt Fund? Not all the amount but like 50% of the savings in Debt fund and rest keep in savings account.
mid 20s, ctc 30LPA(cash, non esops), monthly expense 60k(including needs + wants), how should I invest (~1.5L pm) considering following:
Move to Bangalore, give half of that to @BangaloreLandlord, put the rest in index, US and hybrid funds. Do stock tr...
