The largest public lender, State Bank of India (SBI), has announced that it will raise the minimum threshold (MOD) limit for the auto sweep facility from Rs 35,000 to Rs 50,000.
“We inform that the minimum
threshold limit for the auto sweep facility in Savings Bank accounts has been increased from Rs 35,000/- to Rs 50,000/-. Hence, the next MOD (Multi Option Deposit) shall be triggered at Rs 50,000/-,” wrote SBI in emails sent to its customers.
What It Means?
The Multi-Option Deposit (MOD) facility is a type of fixed deposit linked to your savings or current account.
When the balance in your savings account crosses a set threshold (say Rs 50,000 after the new change), the extra amount above that limit (Rs 35,000) is automatically transferred into an MOD.
An MOD earns fixed deposit (FD) interest rates, which are higher than a normal savings account interest rate.
If the balance in a customer’s savings account is not sufficient to honour the debit mandate, SBI will then partially or fully transfer the money back from the MOD scheme into their account. “The basic feature of the SBI MOD scheme is to facilitate customers to gain a higher interest rate, out of the surplus funds above a threshold limit from the Savings Bank Account is transferred automatically to Term Deposits (MODS),” read a statement on SBI’s official website.
“In case the amount falls short in the Savings Bank Account for honouring the debit mandate, partial/ full withdrawal (reverse sweep) from term deposits will be executed and credited back into the Savings Bank Account.”
The interest on MOD is paid quarterly or on a compounded basis. Upon premature withdrawal of the MOD, the bank pays the customer the concerned broken amount with a penalty at the applicable interest rate for the period the broken amount was held. During this period, the rest of the deposit continues to fetch interest to the customer at the original rate, while the applicable TDS is also deducted.
