Prime Minister’s Employment Generation Programm (PMEGP)

The Prime Minister's Employment Generation Programme (PMEGP) offers  financial assistance to individuals and small businesses to set up non-farm micro-enterprises. With attractive subsidies and simple eligibility criteria, the PMEGP loan is ideal for anyone seeking to kickstart their entrepreneurial dreams. This scheme is implemented by the Khadi and Village Industries Commission (KVIC) in collaboration with banks across India.

Here are the highlights covering the PMEGP loan details:

1. Subsidy Support

   • Rural Areas: 25%-35% of the project cost.

   • Urban Areas: 15%-25% of the project cost.

2. Loan Limits

   • Manufacturing Sector: Up to ₹50 lakh.

   • Service Sector: Up to ₹20 lakh.

3. Interest Rates

   • Generally ranges between 11% and 12%, based on the bank's terms.

4. Collateral-Free Loans

   • Projects costing up to ₹10 lakh are exempt from collateral under RBI guidelines.

5. Tenure and Repayment

   • Flexible repayment options with a tenure of 3 to 7 years, depending on the loan type.

The PMEGP scheme allows beneficiaries to pay a minimum portion of the cost of the project while applying for subsidies on the loans taken from banks that have been linked to the scheme. The subsidy under this scheme is known as margin money, and it is decided based on the category and geographical area where the applicant is based. Here are the subsidy rates that can be accessed under the PMEGP scheme:

The loan limit available under the PMEGP scheme is ₹50 Lakhs. In the manufacturing sector, the maximum project cost has been set at ₹50 Lakhs. In the business or service sector, this limit is capped at ₹20 Lakhs. For both, the special and general beneficiary of the scheme is required to contribute 5% and 10% of the amount, respectively. Meanwhile, the bank pays the remaining 95% and 90% of the amount, respectively.

On the other hand, existing manufacturing units can get additional funding of up to ₹1 Crore under this scheme. Similarly, existing service and trading companies are eligible for extra funding of up to ₹25 Lakhs, as per the regulations of PMEGP.

Ensure you have the following documents when applying:

• Aadhaar and PAN card.

• Educational certificates (minimum 8th standard pass).

• Special category certificates for SC/ST/OBC.

• Rural area certificate (if applicable).

• Detailed project report.

• Skill development or training certificate (if available).

Before applying for a PMEGP loan, ensure you meet these requirements:

1. Who Can Apply?

   • Indian residents aged 18 or older.

   • Must have passed at least 8th standard for projects exceeding ₹10 lakh (manufacturing) or ₹5 lakh (service).

2. Eligible Entities

   • Self-help groups (excluding BPL SHGs).

   • Institutions like co-operative societies, charitable trusts, and societies registered under the Societies Registration Act, 1860.

3. Ineligible Applicants

   • Existing businesses that have availed benefits from other government schemes.

   • Non-resident Indians (NRIs), trusts, and partnerships.

Below we have tabulated the leading financial institutions that support funding assistance as part of the PMEGP scheme.

For the PMEGP scheme list, please visit the official website of PMEGP.

The PMEGP loan application process is straightforward:

Step 1: Online Registration

• Visit the official PMEGP e-portal and register using your Aadhaar and PAN card.

Step 2: Submit Documents

• Upload the required documents, including:

  • Aadhaar and PAN card.

  • Caste or special category certificates (if applicable).

  • Educational qualification certificates.

  • A detailed project report.

Step 3: Select Financial Institution

• Choose a bank or financial institution for loan disbursal.

Step 4: Loan Approval

• The bank evaluates your application and project viability before approving the loan.

The PMEGP loan interest rate varies between 11% and 12%, depending on the lending bank. The loan structure includes:

• Margin Contribution: Applicants must contribute 5%-10% of the project cost.

• Subsidy Component: The government covers 15%-35% through subsidies.

Bank Loan: The remaining portion is financed by banks, covering up to 90%-95% of the cost.

Here’s why the PMEGP loan is a smart choice for entrepreneurs:

• Low Financial Burden: High subsidies reduce the repayment amount.

• Ease of Access: Available through multiple banks, including public sector banks, private banks, and regional rural banks.

• Boosts Self-Employment: Empowers individuals to start their businesses in rural and urban areas.

Collateral-Free Option: No security required for loans up to ₹10 lakh.

While PMEGP loans offer significant advantages, they also have some limitations:

1. Lengthy Approval Process: Loan approvals may take time due to document verification and project evaluation.

2. No Tax Benefits: Unlike other schemes, PMEGP loans do not provide tax exemptions.

Fixed Subsidy Rates: The subsidy amount is predetermined and may not cover all costs.