The tenor of the deposit is left at the customer's discretion by some banks while some banks put a maximum limit to the tenor that can be chosen by the customer.
In case the balance in the savings account falls below the minimum balance limit then immediately a FD is broken and funds are pumped into the savings account. This is called Sweep Out or Reverse Sweep.
Checklist while opting for Auto Sweep facility
So far the auto sweep facility sounds to be a lucrative and easy way of getting better returns from idle money. It is indeed a good option though some points need to be kept in mind by the customer before choosing to opt for this facility. After all, some homework before any investment always brings good reaps.
1.Tenor of the FD: Since the tenor of the FD is predetermined, the customer must keep a note on the time period for which his FD is getting created.
Some banks offer only 1 year deposits as part of auto sweep facility. In such a case the customer is advised to look into interest rates of deposits.
Some banks do offer flexible maturity periods of deposit but put a ceiling or upper limit for the same.
Lenders like State Bank of India and Canara Bank however do not impose any such restriction in this regard.
2.Method of liquidation: The method of liquidation adopted by banks while breaking multiple FDs (in case of sweep out) is also necessary to be noted. Some banks offer LIFO (last in first out) while some offer FIFO (first in first out).