PMEGP Loan: All You Need to Know About the PMEGP Scheme

Learn how the Prime Minister’s Employment Generation Programme (PMEGP) offers financial assistance to those who wish to set up new projects.
pmegp
The Prime Minister Employment Generation Programme (PMEGP) is a Government of India-backed creditlinked subsidy scheme. Under this scheme, beneficiaries can get a subsidy amounting to 15% to 35% of the project cost from the government. PMEGP is an initiative of the Ministry of Micro, Small and Medium Enterprises and is implemented at a national level by the Khadi and Village Industries Commission (KVIC). As an entrepreneur, PMEGP can give you the financial assistance required to set up a new project. Read on to know more about the PMEGP scheme

What are the objectives of the PMEGP Loan Scheme?

  • To create jobs in India’s urban and rural areas by launching new self-employment programmes, microenterprises, and ventures.
  • To the greatest extent possible, support self-employment options for widely scattered traditional
    artisans/ unemployed rural and urban youth.
  • To create long-term and consistent employment for rural and unemployed young persons, halting their
    migration to cities.
  • Increasing artisans’ earning potential and accelerating rural and urban employment growth.

How to make a PMEGP online application?

  • To start with PMEGP online, apply via the e-portal.
  • Click on ‘online application form for individual’/ ‘online application form for non-individual’.
  • Fill out the entire form by entering details like name, sponsoring agency, type of activity, first financing
    bank, and so on
  • When done, click on ‘save applicant data’.
  • Then, upload the documents and prepare for final submission.
  • After final submission, you will get an application ID and a password sent to your registered mobile
    number.

Benefits of PMEGP

The benefits of PMEGP are as follows:

  • It provides low-interest loans and subsidies to set up new micro-enterprises in the non-farm sector for
    rural and urban areas.
  • It encourages financial institutions to increase credit flow to the micro sector and reduces the
    dependency on money lenders
  • It provides employment opportunities to traditional artisans and unemployed youth to reduce migration rates from rural to urban areas. It increases the employment and entrepreneurship characteristics of the regions and of the nation. It gives everyone an equal and fair chance to qualify for the subsidy as the eligibility criteria are not very intensive
  • It covers most of the industries except a few, which are already included in the negative industries list.

What is the PMEGP loan limit?

The PMEGP loan limit is Rs. 9.5 to Rs. 50 lakh. The scheme caps the maximum project cost for the manufacturing sector at Rs. 50 lakh. It caps the cost at Rs. 20 lakh for the business/ service sector. The beneficiary makes a 5 to 10% contribution, and the bank sanctions the remaining 90 to 95%. In reality, your bank credit will only cover 60% to 75% of the project’s cost. The PMEGP scheme covers the remaining 15% to 30%, and the bank will finance capital expenditure in the form of Term Loan and working capital in the form of cash credit or in form of composite loan consisting of capital expenditure and working capital.

Does a PMEGP loan require collateral?

Projects costing up to Rs. 10 lakh do not require security as per RBI guidelines. For projects with costs ranging from Rs. 5 lakh to 25 lakh, CGTMSE provides a collateral guarantee. The PMEGP loan process is different for projects costing over Rs. 10 lakh as you may need to provide security as per your lender’s terms.

What is the PMEGP loan interest rate?

Loans under the PMEGP scheme incur regular interest rates between 11% and 12%.

What are the main PMEGP loan details?

  • Banks sanction funding up to 95% of the project cost.
  • On this, the government provides 15% to 30% as margin money or PMEGP subsidy.
  • The bank provides the remaining 60% to 75% as a Term Loan and working capital in the form of cash
    credit or in form of composite loan consisting of capital expenditure and working capital.
  • Interest rates are regular, from 11% to 12%.
  • Repayment tenure is 3 to 7 years after a preliminary moratorium.

Who can apply for a PMEGP loan?

Here is the list of persons who can apply for funding for new projects under the PMEGP scheme.

  • Any individual who is above 18 years of age
  • The person should have passed at least the 8th standard for a manufacturing sector project costing
    above Rs. 10 lakh.
  • The person should have passed at least the 8th standard for a business/ service sector project costing
    above Rs. 5 lakh
  • Self-help groups (even those falling below the poverty line provided that the SHG has not obtained
    benefits from another scheme)
  • Institutions registered under the Societies Registration Act, 1860.
  • Production co-operative societies.
  • Charitable trusts.

However, units already benefiting under a state or central government scheme cannot avail of a PMEGP loan.

What are the documents required when making a PMEGP loan application?

Here are some documents that you may need to produce when applying for the PMEGP loan scheme:
1. Caste Certificate
2. Special Category Certificate, wherever required
3. Rural Area certificate
4. Project Report
5. Education/ EDP/ Skill Development training certificate
6. Any other applicable document

Financial assistance under PMEGP scheme

Financial assistance under the PMEGP scheme is provided by the Government of India to promote selfemployment and generate income opportunities for the unemployed and underemployed population. The scheme offers a subsidy on the project cost, which is calculated as a percentage of the margin money. The subsidy varies from 15% to 35%, depending on the category and location of the beneficiary. The remaining amount of the project cost is financed by the bank as a Term Loan. The scheme also provides training and guidance to the entrepreneurs to help them run their enterprises successfully.

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Frequently asked questions

A PMEGP subsidy is a financial assistance provided by the government to eligible entrepreneurs who set up new micro-enterprises under the Prime Minister’s employment generation programme (PMEGP). The subsidy ranges from 15% to 35% of the project cost, depending on the category and location of the beneficiary.
The maximum project cost allowed under PMEGP is Rs. 50 lakh for the manufacturing sector and Rs. 20 lakh for the business or service sector. The project cost includes capital expenditure, working capital and the own contribution of the beneficiary.
The businesses that come under PMEGP are those that belong to the non-farm sector and are positive in the opinion of the government. The scheme covers various sectors such as agriculture and food processing, forest-based products, handmade paper and fibre, mineral-based products, polymer and chemical-based products, rural engineering and biotech, service and textile, etc.
The time taken to get a PMEGP loan depends on various factors such as the submission of the application, the verification of the documents, the sanction of the loan by the bank. the completion of the training program and the disbursement of the margin money subsidy. The approximate time duration to avail the loan under PMEGP from banks usually requires approximately 2 months in total.