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Seen as a major fiscal move, government employees' general provident fund (GPF) and contributory provident fund (CPF) have been split into three tiers with yields pruned down, sources have said.
Earlier, there was a unique flat rate of profit at 13 per cent for all sizes of fund deposits. But now those having up to Tk 1.5 million of such funds will get 13-percent profit.
For two other upper slabs the rates are lowered proportionately. For up to Tk 3.0 million, profit will be 12 per cent while for above Tk 3.0 million profit will come down to 11 per cent.
The Ministry of Finance issued a circular on September 07 about rate readjustments on the provident funds.
Currently, government employees can deposit 5.0 to 25 per cent of their basic salary into GPF. In a contributory provident fund, an employee gives 10 per cent and the government pays as much for them.
In the case of a corporation, the government or the corporations or autonomous bodies pay 8.3 per cent into CPF account.
The new slabs and rates of profit will be effective from this fiscal year (2022-2023).
People familiar with the matter at the finance division told the FE that the government introduced the new rates of profit and slabs as it wants to lower the interest burden during this pandemic period when there has been general financial crunch at home and abroad.
"This is part of the ongoing austerity measures the government adopting since the beginning war of in Ukraine and other problems facing the economy following volatility on the forex market," says one official.
The sources say many government employees deposit up to 25 per cent of their basic salary to get a higher profits.
They believe this new system will discourage them.
In corporations and other autonomous bodies, there is no GPF system. They get only two basics as gratuity from the ministry of finance.
They have also CPF but here they get 8.3 per cent from their organisations.