Credit and finance for MSMEs: Private lender Kotak Mahindra Bank’s new auto sweep facility ActivMoney for customers with savings accounts will enable them to earn fixed deposit (FD)-like interest up to 7 per cent per annum, the bank announced on Thursday. Moreover, customers will also be able to withdraw their funds anytime.
Once customers avail ActivMoney feature in their savings account, it automatically transfers the amount — above the default minimum threshold of Rs 25,000 — in multiples of Rs 10,000 to an FD of 180 days during which the amount earns 7 per cent interest. The amount in the savings account continues to earn 3.5 per cent interest per annum.
For example, if a savings account has Rs 35,000 balance, Rs 10,000 (above Rs 25,000 threshold) is moved to an FD to earn higher interest. In case the customer intends to use the funds, the entire balance in the savings account and FD is instantly available.
Kotak Mahindra Bank has also extended the offer to current accounts, which are opted by businesses such as MSMEs, with a minimum threshold of Rs 50,000 over which the surplus funds earn 7 per cent interest.
“ActivMoney feature is available in the current account as well and can benefit MSME customer basis liquidity in their account and transaction patterns,” said Bhaskar Thakur, Head – Liability Products and Merchant Acquiring, Kotak Mahindra Bank Ltd told FE Aspire.
MSME customers have long purchase and sales cycles where collections in the current account sit idle for a reasonable period before the funds are utilised to make purchases or payments, such MSMEs can benefit by using this feature to park excess liquidity in ActivMoney automatically, he added.
Through Kotak’s current account, MSMEs can get overdraft limits and through the bank’s payment app kotak.biz, which has paperless self-onboarding, can instantly generate UPI QR, accept payments by card (tap-on-phone) and also generate links and send to customers via SMS/WhatsApp to pay using any mode of choice, according to Thakur.
The ActivMoney feature is also available for salary accounts and 811 zero balance savings accounts by Kotak Mahindra Bank for which the minimum threshold is Rs 25,000 similar to savings account.
The auto sweep facility essentially refers to transferring funds in excess of a threshold amount from a customer’s account to a deposit that offers a better return.
According to RBI data, as of March 2023, the cumulative savings account deposit of all scheduled commercial banks in India was Rs 62.9 lakh crore that earns an industry average of 3.5 per cent interest per annum as against other instruments like FD, liquid funds etc., which gives them higher interest for a duration of six months to one year.
For MSMEs, Kotak Mahindra Bank November last year had also launched a Merchant One Account — a current account that offers services viz., keeping a digital ledger, recording customer databases, ordering stocks digitally etc. without levying non-maintenance charges if MSMEs miss maintaining the monthly average balance in this account.