In one of my earlier post, I did explain how you can earn upto 9% interest on your Savings account. (Read the post here). Many members asked me about whether such facility available with SBI. So in this post, I am providing details regarding Sweep-in facility in SBI and how can you earn more from your idle Saving Account balance.
SBI Savings Plus Account is a Savings Bank Account linked to MODS (Multi Option Deposit Scheme), wherein you can earn high interest from your idle funds in Savings Account.
Sweepin Facility – The surplus funds in your savings account (above a threshold limit) is transferred automatically to Fixed Deposits and earns higher interest. When you need the money, the amount will automatically come in Savings Account from FD.
Some of the features of this account are as follows:
1) You can either open a new Savings Plus account or request to re-designate the existing savings bank account.
2) Monthly Average Balance (MAB) requirement – As a normal rule, you need to maintain the minimum balance as required. However, the rules have been reled since 2018. See below:
- w.e.f 01.11.2018, In case of the balance falls below Rs 3,000/- MODs will be broken to maintain a balance of Rs 3,000/ in the account
- If sufficient balance in MOD is not available, on account of which the system is unable to maintain the minimum balance of Rs 3000/- in the account, the customer is liable to pay charges on non- maintenance of AMB as applicable to the geographical location where the account is maintained.
3) Minimum threshold limit for transfer to MOD – Rs 35000 (Any surplus funds retaining a minimum of Rs. 25000/ in Savings Bank (to be set up by the customer) will be transferred as Term Deposit with a minimum of Rs. 10,000/- and in multiple of Rs. 1,000/- at one instance)
4) Choice of break open of TDRs – The customer has to specify whether’ First in First Out” or “Last in First out” principle should be applied for break opening of deposits. In absence of any mandate the “last in First out” principle will be applied.
5) Period of deposit : 1-5 years : You can choose the maturity for FD – 1 to 5 years . By default, SBI will create FD for 1 year maturity period.
6) Auto-sweep facility will be operative twice a month, based on the balance in Savings Plus account at the start of day on the 10th and 20th of every month.
7) When the customer withdraw money or draws a cheque, the amount will come fromt heSavings plus Account first. If the balance in insufficient, the money will seamlessly come from Fixed deposit account. By default, SBI will follow the principle of `last in first out’. This means it will break the latest SBI MOD deposit by an amount (in multiples of Rs 1,000) that is adequate for the payment of the cheque / withdrawal.
9) An overdraft limit or a demand loan facility is not available against the SBI MODS TDRs/STDRs created under the Autosweep facility.
SBI Savings Plus Account Interest Rate
1) SBI MOD Balance Interest rate – Interest paid on term deposits created through the Autosweep facility will be as per published interest rates for TDRs and STDRs for the various maturities. (current FD rates 5.75% to 6.8%)
2) If the FD is sweep-out before original maturity date, the interest shall be 0.50% below the rate applicable for the period the deposit has remained with the Bank or 0.50% below the contracted rate
So for e.g if you choose the tenure for 1 year, you will get an Interest for 6.8% .
However, it is likely that you withdraw money before 1 year. Suppose you withdraw money after 3 months. In that case, you will get the Interest rate applicable for 3 months minus 0.5% = 6.25 – 0.50 = 5.75% ( which is still better than 4% interest on Savings Account)
3) The interest on balances in Savings Plus accounts will be the same as that on savings bank accounts and will be calculated and applied in the same manner.
Tax Aspects of Savings Plus MOD Account
1) Like Normal Saving Account, Interest earned in Saving plus account is also Taxable. However, you can claim a deduction upto rs 10000 u/s 80TTA
2) Like Normal FD, Interest earned on MOD FD is taxable and subject to TDS (if more than Rs 10000 in an year)
3) Read my other post – How to avoid TDS on FD Interest.
How to open SBI Savings Plus Account (with MOD scheme) / Application form
The scheme is operative in all SBI Branches and all you need is give an application to convert your present Savings Bank into MOD account by undertaking to keep the minimum balance of Rs.10000 always or you can open a separate MOD Savings Bank Account.
If you have already SB Account with them, no extra formalities are required. However, they may ask you again your identity proof, address proof and pass port size photo.
High Interest – SBI Saving Plus account with MOD is good option for people to earn high interest on their idle money lying in Savings Account. If you keep money for atleast 7 days, you will earn a minimum Interest of 6.5% and upto 9.25% ( which is better than 4% earned in normal savings account)
Liquid – The money is available as and when needed (like normal savings account) and you will not feel any difference when withdrawing or drawing cheque.
Flexible – While comparing to other bank’s sweep-in facility, the SBI savings Plus MOD is very flexible which allows you to choose the threshold limit as well as FD duration.
Important thing to note: One of the drawback is that you need to maintain and keep track of the minimum account balance requirements. The systems will not automatically take money from MOD to maintain minimum balance. I would have like to have an option to sweep-out money from MOD to maintain the minimum balance.
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