Indian Fintech Razorpay notes that a current account is usually a “feature-loaded” banking product that’s designed to streamline money movement for businesses.
The Razorpay team writes in a blog post that just like any other bank account, a current account has a few “standard features” and requirements for deposits, minimum balance, as well as making withdrawals.
But what sets these accounts apart from any other type of bank account is that banking institutions do not pay interest on the credit balance to clients who maintain a current account. So any idle money sitting in the account does not accrue interest, which may lead to an opportunity cost for the business that maintains these accounts.
The Razorpay team further notes that this issue can be addressed with a sweep current account which “comes equipped with the sweep facility, through which money in excess of a [certain] balance gets transferred to a deposit that gives you a greater return – usually a fixed deposit” and this is called “sweep-out.”
Razorpay also mentions in a blog post that when the balance in your account falls below the stipulated threshold, “the amount of the shortfall flows back into your account” and this is called “sweep-in.” This process of “sweeping the money into or out of your account happens at the end of each working day – ensuring that the optimum balance is maintained in your account,” the neobanking platform explains while adding that “all your excess cash gets the highest return from a safe fixed deposit.”
As noted by Razorpay, the primary reason for opting for the sweep facility is “to earn interest on money in your account.” The Fintech firm also mentioned that the sweep facility allows you “to have ample liquidity while ensuring a good return on your funds.”
As explained by Razorpay:
“Say you have an EMI pending or a cheque due and are running low on funds in your sweep current account. Your bank will automatically transfer the funds from the amount invested earlier to your account to ensure timely payment of the EMI or the cheque, saving your time and effort.”
The company added:
“Banks generally let you choose the period of the deposit, the maturity, and the threshold amount. There may, however, be a minimum holding period for fixed deposits, and premature withdrawal may lead to loss of interest.”
Razorpay also noted that you can link multiple deposits to the current account “for sweep-in to ensure you never have a liquidity crunch.” In such cases, banks usually “apply the LIFO (Last in First Out) rule, which means that, when a sweep-in is triggered, funds will be transferred to your account from the latest deposit linked to the sweep-in facility.”
Razorpay further noted:
“Apart from the higher interest rate, the sweep-in facility helps you create a corpus that you can access in an emergency, without having to liquidate any other asset In a nutshell, having a current account with a sweep facility can be a major plus for your business.”
The Razorpay also mentioned that if you’ve been wondering if there’s more to banking than “buggy legacy systems and inefficient processes,” then you are at “the right place.”
The company added:
“We at RazorpayX proudly enable disruption, and we do it with our comprehensive, cutting-edge banking solution – the RazorpayX Current Account.”
With your RazorpayX Current Account, you are able to:
- Make instant payouts, 24*7*356 (even on bank holidays)
- Add beneficiaries and transact instantly, without a cooling period
- Gain detailed insights into your finances
- Automate payouts with powerful APIs
- Set up an efficient approval workflow
- Access a suite of smart apps and integrations, like Payout Links, Vendor Payments, Payroll
- Avail of the sweep facility to earn interest on your idle funds
- Get 500 free payouts every month
You may apply for a RazorpayX Current Account within minutes. To learn more, check here.