SBI hikes auto sweep threshold to Rs 50,000: What it means for customers

Surplus funds in savings accounts will now be swept into fixed deposits only if balance crosses Rs 50,000

 

State Bank of India (SBI) has revised the minimum threshold for its auto-sweep facility, which allows savings account customers to earn higher returns on surplus funds without locking away their entire balance.

 

Customers availing of the facility will have to maintain a minimum balance of Rs 50,000 in their savings accounts before surplus funds are automatically converted into fixed deposits. The earlier threshold was Rs 35,000.

 

What is SBI’s MOD facility?

 

The facility, which is also called the Multi Option Deposit (MOD) scheme, works like this:

 

Automatic sweep: Any amount above the threshold (now Rs 50,000) is transferred into a fixed deposit (MOD) in units of Rs 1,000.

 

Better returns: These MOD deposits earn the prevailing term deposit interest rate, which is typically higher than interest for savings account.

 

Easy liquidity: If the savings account balance falls short, SBI automatically does a ‘reverse sweep’, transferring funds back from the MOD to meet the shortfall.

 

MOD facility is a good option for those who want higher returns but still need access to funds on short notice.

 

Interest and premature withdrawal

 

Interest on MOD deposits is compounded quarterly and paid at maturity. In case of premature withdrawal, the amount broken is paid with a small penalty, but the remaining deposit continues to earn interest at the original contracted rate.

 

Senior citizens are eligible for an additional interest rate benefit on MOD deposits, according to the bank’ rules.

 

Impact of higher threshold

 

SBI, by increasing the threshold, is effectively ensuring that smaller balances stay in the savings account and do not get swept into fixed deposits. This change may affect customers who keep moderate balances and relied on the facility to earn better interest.

 

Bottom line

 

The revision will mostly impact customers who maintained balances just above Rs 35,000, as they will no longer benefit from automatic sweeps unless their savings account crosses Rs 50,000. For those with higher balances, the MOD facility continues to remain an efficient way to earn higher returns while keeping funds liquid.