Do Not Keep Emergency Funds in Savings Account, Sweep in FD is a Better Option


  • 2.7% interest on SBI Savings Account
  • 5.7% SBI’s maximum interest on FD

In this era of epidemic, every man keeps the deposits in his savings account for a difficult time, so that he can withdraw whenever he wants. Banks have reduced interest rates on savings accounts for some time. So keeping money here is no longer a profitable deal. There are other options to keep emergency funds where you will get higher returns. 

Investment adviser Balwant Jain explains that many banks nowadays opt for the sweep in deposit scheme. Under this, the amount deposited in your savings account more than the prescribed limit will automatically be converted into FD.

It means to say that if you have 1 lakh rupees deposited in your account and the bank has set a limit of 25 thousand then the remaining 75 thousand rupees will be automatically converted into FD. On this amount, you will get interest as much as the FD of the concerned bank and you can withdraw the amount from the account whenever you want. If you took out 25 thousand from the account, now you will get FD interest on the remaining 50 thousand and savings account interest on 25 thousand. Generally, the FD limit in this account is 1 year and every bank may have different rules on the amount deposited in the account.

Liquid Mutual Fund…

It is true that liquid funds under debt mutual funds also get more interest from savings account. This is the preferred option for short-term investors because the risk is very low. You can withdraw any amount from the deposit in the account whenever you want. There is no entry and exit load. For example, there is no fee to be charged or withdrawals. Therefore it is popular. Most liquid funds get up to 5% interest. Some funds also pay interest as much as FD.

Try FD in hand

Fixed deposit scheme ie investment in FD has always been the first choice. FDs of banks still get more interest from savings accounts. Nowadays many banks do not charge any fee or charge for breaking FD before the scheduled time. Most banks now have FD rates of up to 3% -5.75%. If you have deposited Rs 2 lakh in the bank’s savings account, then you will get Rs 5,400 interest at the rate of 2.7% throughout the year. 5% FD will give interest of Rs 10 thousand. Your returns will increase by 85%. So FD can be a wise decision.

Keep these things in mind

-Do not invest in risky funds.
-Before investing, do all the information about the FD from the bank
-Remember, emergency fund is not for earning money but for difficult times,

Please calculate tax on the return…

Protecting the emergency fund is the most important step. If you get returns with security, then you should definitely invest in FD or liquid fund. However, every investor must calculate the tax according to their income on the returns it receives. -Jagdish Thakkar, Investment Advisor


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