A Flexi-Fixed deposit is a special kind of deposit offered by

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becau ...

s in

India India, officially the Republic of India ( Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the ...

. It is a combination of a

demand deposit Demand deposits or checkbook money are funds held in demand accounts in commercial banks. These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country. Simply put, these are depo ...

and a fixed deposit. The depositor is able to enjoy both the

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liqu ...

of savings and current accounts and the high returns of fixed deposits.

Mode of working

A Flexi-Fixed deposit has two features that effectively combine the benefits of savings and current accounts and fixed deposits: *The "Auto-sweep feature (sweep-in)": The balance in excess of a stipulated amount is automatically transferred to a fixed deposit (FD) account for a default term of one year. By this transference, amounts in excess of a fixed limit can earn a substantially higher rate of return. FDs formed through auto sweep carry the interest rate on FD of one year, based upon the rate on the day of the auto sweep. Hence, the Flexi Fixed deposit scheme has two components: a savings and current account component, and a fixed deposit account component. *Reverse sweep (sweep-out): In case of

insufficient funds Dishonoured cheques (also spelled check) are cheques that a bank on which is drawn declines to pay (“honour”). There are a number of reasons why a bank would refuse to honour a cheque, with non-sufficient funds (NSF) being the most common o ...

in a savings account to honour any debit instruction (e.g., when the customer wants to withdraw money through

cheque A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The pers ...

or through an ATM), the balance in the FD to the extent needed to meet the shortfall is automatically withdrawn in multiples of ₹1000 (or any other amount set by the bank). The remaining balance in the FD continues to earn higher interest at the original rate applicable to FDs. In the event the customer wants to withdraw more than what is deposited in his savings account, the bank would withdraw money from the fixed deposit component. Many banks do not allow customers to take out

loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...

s against amounts in the FD component of Flexi Fixed deposits.

References

{{Reflist Banking in India Interest-bearing instruments Bank deposits