Kotak Mahindra Bank on Thursday, June 15, announced the launch of its ActivMoney feature, which gives customers the benefit of fixed deposit (FD) like interest of up to 7 percent and the flexibility to access funds anytime. Notably, all commercial banks like State Bank of India (SBI), HDFC Bank, ICICI Bank, among others already provide the 'sweep-in' feature that lets customers earn higher returns on savings accounts.
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Decoding Kotak Mahindra Bank's new feature
Through Kotak Mahindra Bank's ActivMoney, excess funds in the account, beyond a defined threshold, are automatically transferred into a fixed deposit, thereby helping customers earn a higher interest on their savings.
The feature, according to the lender, spruces up interest income on the savings account with a 7 percent interest rate for 180 days as well as no premature withdrawal charges, which otherwise are applicable to a fixed deposit.
How it works?
Once a customer avails the ActivMoney feature in the savings account, it automatically transfers the balance above the threshold (defined as per account variant) in multiples of Rs 10,000 to an FD of 180 days currently at an interest rate of 7 percent.
"In case a customer wishes to use the funds, the entire balance in savings and FD is instantly available. Thus, a customer earns higher interest for the time he/she keeps savings in FD, while the balance in the savings account earns 3.5 percent. ActivMoney is also available to 811 (digital) and current account holders," the lender said.
The default minimum threshold over which the surplus funds earn FD-like higher interest rate is Rs 25,000 for savings/salary/811 accounts and Rs 50,000 for current accounts.
New customers can avail of this facility when they open an account online via www.kotak.com or by visiting the nearest branch, while existing customers can sign up through mobile banking shortly or the nearest branch.
Understanding the sweep-in facility of banks
The 'sweep-in facility' allows bank to transfer any sum in excess of the amount stipulated by the customers from a savings account to a sweep-in deposit, which then works like an FD. While some banks may offer the flexibility of choosing the FD tenure, there are few banks which have fixed tenure.
For example, say, Mrs X has recently linked the savings account with a fixed deposit account for a one-year tenure. If she opts for the sweep-in facility and chooses a limit of Rs 50,000, any amount beyond that will automatically be transferred to the FD.
Now, suppose the balance is Rs 35,000, and she receives a cheque for Rs 40,000 which she deposits in the savings account, and her bank balance reaches Rs 75,000. At this point, the bank will automatically transfer the excess of Rs 25,000 to the linked FD account.
The withdrawal in sweep-in deposit takes place in two ways — LIFO (last in first out) or FIFO (first in first out). In the LIFO method , the most-recently booked FD is closed first for the purpose of withdrawal while in FIFO (first in first out), the first FD created by swept-in is broken first.
Should customers opt for it?
Experts suggest opting for the facility in order to earn higher returns and going for LIFO method in case of premature withdrawal. LIFO lets users earn better because the first FD swept can earn interest for a longer period.
Some banks may also charge a penalty for premature withdrawal. So, it is important to ensure whether the FD tenure is aligned with requirements or not.
Here's a look at latest FD rates of banks:
| Bank Fixed Deposit Rates | ||||
| Bank Name | Interest Rates (p.a.) | |||
| Highest slab (%) | 1-year tenure (%) | 3-year tenure (%) | 5-year tenure (%) | |
| SMALL FINANCE BANKS | ||||
| AU Small Finance Bank | 7.75 | 6.75 | 7.75 | 7.00 |
| Capital Small Finance Bank | 7.60 | 7.60 | 7.15 | 7.10 |
| Equitas Small Finance Bank | 8.50 | 8.20 | 8.00 | 7.25 |
| ESAF Small Finance Bank | 8.50 | 6.00 | 6.75 | 6.25 |
| Fincare Small Finance Bank | 8.51 | 7.50 | 8.00 | 8.00 |
| Jana Small Finance Bank | 8.50 | 7.25 | 7.35 | 6.00 |
| Suryoday Small Finance Bank | 9.10 | 6.85 | 7.25 | 9.10 |
| Ujjivan Small Finance Bank | 8.25 | 8.25 | 7.20 | 7.20 |
| Unity Small Finance Bank | 9.00 | 7.35 | 7.65 | 8.25 |
| Utkarsh Small Finance Bank | 8.25 | 7.75 | 8.25 | 7.50 |
| PRIVATE SECTOR BANKS | ||||
| Axis Bank | 7.10 | 6.75 | 7.00 | 7.00 |
| Bandhan Bank | 8.00 | 7.25 | 7.25 | 5.85 |
| CSB Bank | 7.35 | 5.00 | 5.75 | 5.75 |
| DBS Bank | 7.50 | 6.25 | 6.50 | 6.50 |
| DCB Bank | 8.00 | 7.25 | 8.00 | 7.75 |
| HDFC Bank | 7.25 | 6.60 | 7.00 | 7.00 |
| ICICI Bank | 7.10 | 6.70 | 7.00 | 7.00 |
| IDFC First Bank | 7.75 | 6.75 | 7.75 | 7.00 |
| IndusInd Bank | 7.75 | 7.75 | 7.50 | 7.25 |
| Jammu & Kashmir Bank | 7.10 | 7.10 | 6.50 | 6.50 |
| Karnataka Bank | 7.30 | 7.00 | 6.50 | 6.50 |
| Karur Vysya Bank | 7.50 | 7.00 | 7.00 | 6.25 |
| Kotak Mahindra Bank | 7.20 | 7.10 | 6.50 | 6.20 |
| Nainital Bank | 7.05 | 6.70 | 6.25 | 5.75 |
| RBL Bank | 7.80 | 7.00 | 7.10 | 7.10 |
| SBM Bank India | 7.80 | 7.05 | 7.65 | 7.65 |
| South Indian Bank | 7.40 | 6.60 | 6.50 | 6.00 |
| City Union Bank | 7.00 | 6.75 | 6.50 | 6.25 |
| Tamilnad Mercantile Bank | 7.25 | 7.25 | 6.50 | 6.50 |
| PUBLIC SECTOR BANKS | ||||
| Bank of Baroda | 7.25 | 6.75 | 7.05 | 6.50 |
| Bank of India | 7.00 | 7.00 | 6.50 | 6.00 |
| Bank of Maharashtra | 7.00 | 6.35 | 6.00 | 5.75 |
| Canara Bank | 7.25 | 7.00 | 6.80 | 6.70 |
| Central Bank of India | 7.10 | 6.75 | 6.25 | 6.25 |
| Indian Bank | 7.25 | 6.10 | 6.25 | 6.25 |
| Indian Overseas Bank | 7.25 | 6.50 | 6.50 | 6.50 |
| Punjab National Bank | 7.25 | 6.75 | 7.00 | 6.50 |
| Punjab & Sind Bank | 7.35 | 6.40 | 6.25 | 6.25 |
| State Bank of India | 7.10 | 6.80 | 6.50 | 6.50 |
| Union Bank of India | 7.00 | 6.30 | 6.50 | 6.70 |
| FOREIGN BANKS | ||||
| Deutsche Bank | 7.75 | 7.00 | 7.75 | 7.25 |
| HSBC Bank | 7.50 | 4.00 | 7.00 | 6.00 |
| Standard Chartered | 7.35 | 7.25 | 6.75 | 6.75 |
| Source: Paisabazaar.com | ||||
| Interest rates as of June 14, 2023 | ||||
(Edited by : Shoma Bhattacharjee)
First Published: Jun 15, 2023 4:35 PM IST
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