That depends on the amount you keep there. If it is say 50 lakhs then the interest rate would be near 7%. Now, for sweep in accounts like Kotak (I have one as well), let’s say you kept 20 lakhs per month in Fincare and Kotak each. Now, in Kotak, they will make multiple FDs each time your balance increases. Let’s say you have 5 lakhs. They make a FD today of 4.75 lakhs for 6 months at 7%. A week later you add another lakh and now a new FD maturing 6 months plus one week. 2 weeks later you add 3 lakhs and now a new FD and so on. Thus, you reach 20 lakhs and have dozens of FDs. If you actually want to enjoy the 7% on that 20 lakhs, you have to make sure not to do any debit that would trigger those FDs to be closed. I need to move funds several times a week for trading, paying bills and other reasons. So I would only get 3 to 4% max on the FDs that would be constantly broken. If I knew I wouldn’t need that money then I would place it in a 8.5% FD instead. In addition, you get only simple interest on Kotak which reduces your yield. In the 7.5% savings, all my money above the 7.5% threshold gets 7.5% compounded monthly whether it is kept for 1 week, 2 months or the full 6 months. If I move 10 lakhs for trading today but bring it back later in the evening or tomorrow, I keep getting 7.5% on the whole balance. In Kotak, that would mean 10 lakhs FD broken, 3% interest on it and then another 6 months FD starts again and I have to watch out for 6 months if I want that 7% on it. It’s too complicated except for people who keep adding money and rarely withdraw it.
