PMEGP scheme background: launch, merged schemes and approved period
The Prime Minister's Employment Generation Programme (PMEGP) started on 1 April 2008. It was introduced by merging two earlier schemes: the Prime Minister's Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP), both of which operated until 31 March 2008.
The Ministry of Micro, Small and Medium Enterprises approved the continuation of PMEGP for five years, from FY 2021–22 to FY 2025–26.
Who implements PMEGP: roles of KVIC, KVIB and DIC
At the national level, the Khadi and Village Industries Commission (KVIC) implements PMEGP as the single nodal agency. KVIC is a statutory organisation under the administrative control of the Ministry of Micro, Small and Medium Enterprises.
At the state and district levels, the scheme operates through the following agencies:
- State offices of KVIC: Support scheme implementation and coordinate activities at the state level.
- State Khadi and Village Industries Boards (KVIBs): Help identify eligible beneficiaries and viable projects and facilitate implementation in their respective states.
- District Industries Centres (DICs): Support entrepreneurs at the district level and help identify eligible projects and applicants.
- Banks: Assess loan applications, provide the bank-financed portion of the project cost and handle the government subsidy in accordance with scheme guidelines.
- Coir Board: Supports implementation for eligible coir-related activities.
KVIC routes the government subsidy through the identified banks, which credit it to beneficiaries' bank accounts as per the scheme's applicable procedures. KVIC, KVIBs and DICs also work with non-government organisations, Self-Help Groups (SHGs), the National Small Industries Corporation (NSIC), Udyami Mitras, Panchayati Raj institutions and other organisations to identify beneficiaries and viable projects and provide entrepreneurship development training.
Benefits of PMEGP scheme
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 gives everyone an equal and fair chance for qualifying 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.
To learn about a similar initiative, check out the Standup India scheme which also aims at promoting self-employment, especially for women and SC/ST entrepreneurs.
PMEGP subsidy breakdown: How much can you get?
Under the PMEGP scheme, the subsidy ranges from 15% to 35% of the project cost, depending on the beneficiary category and whether the project is located in an urban or rural area. The remaining amount is funded through the applicant's contribution and bank financing.
| Beneficiary category | Own share | Urban subsidy | Rural subsidy |
| General category | 10% | 15% | 25% |
| Special category (SC/ST/OBC/Minorities/Women/Ex-servicemen/Transgenders/Persons with Disabilities/NER, Aspirational Districts, Hill and Border Areas as notified by the Government, etc.) | 5% | 25% | 35% |
Under the PMEGP scheme, the bank finances the remaining project cost after adjusting the beneficiary's own contribution and the applicable subsidy. For example, for a Rs. 10 lakh project, a Special category beneficiary in a rural area receives a subsidy of Rs. 3.5 lakh, contributes Rs. 50,000, and the bank finances the remaining Rs. 6 lakh.
PMEGP funding for a Rs. 10 lakh project: example for each category
The following table illustrates how a Rs. 10 lakh project cost is divided among the beneficiary’s own contribution, government subsidy and bank finance under PMEGP. The amounts vary according to the beneficiary category and whether the project is located in a rural or urban area.
| Category and area | Own contribution | Subsidy | Bank finance |
| General category, urban | Rs. 1,00,000 | Rs. 1,50,000 | Rs. 7,50,000 |
| General category, rural | Rs. 1,00,000 | Rs. 2,50,000 | Rs. 6,50,000 |
| Special category, urban | Rs. 50,000 | Rs. 2,50,000 | Rs. 7,00,000 |
| Special category, rural | Rs. 50,000 | Rs. 3,50,000 | Rs. 6,00,000 |
These figures are illustrative. The actual subsidy and bank finance depend on the applicant's category, project location and applicable PMEGP guidelines.
Rural and urban areas under PMEGP: how the scheme decides
Under PMEGP, the subsidy rate depends on whether the project is classified as rural or urban. An area recorded as a village in the revenue records of a State or Union Territory is considered rural, irrespective of its population. Areas under Panchayati Raj institutions are also classified as rural, regardless of population, while areas under Municipalities are treated as urban.
This classification determines the applicable subsidy rate and the beneficiary's contribution towards the project cost.
What is the PMEGP loan limit?
Under PMEGP, the maximum eligible project cost is Rs. 50 lakh for the manufacturing sector and Rs. 20 lakh for the service or business sector. The beneficiary contributes a prescribed share of the project cost, while the government subsidy and bank finance cover the remaining amount, subject to the scheme's guidelines.
The following table summarises the project cost limits, beneficiary contributions, bank finance and subsidy provisions.
| Sector or component | Maximum project cost | Beneficiary contribution | Bank finance or subsidy |
| Manufacturing | Rs. 50 lakh | General: 10%; Special: 5% | Bank finance covers the balance after adjusting the beneficiary's contribution and applicable subsidy. |
| Service/Business | Rs. 20 lakh | General: 10%; Special: 5% | Bank finance covers the balance after adjusting the beneficiary's contribution and applicable subsidy. |
| Subsidy (Margin Money) | Not applicable | Not applicable | General category: 15%–25%; Special category: 25%–35%, depending on the project location. The subsidy is subject to the scheme's lock-in period and guidelines. |
The maximum eligible project cost is not the same as the loan amount disbursed. The final bank finance depends on the beneficiary's contribution, the applicable subsidy and the lender's assessment.
Does a PMEGP loan require collateral?
Under RBI guidelines, eligible micro and small enterprise loans up to Rs. 10 lakh are generally exempt from collateral security requirements. For eligible PMEGP projects above this amount, collateral requirements depend on the applicable lending guidelines and the lender's terms. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) may provide credit guarantee coverage for eligible loans, helping borrowers access finance without conventional collateral, subject to the applicable conditions.
What is the PMEGP loan interest rate?
The PMEGP loan interest rate is determined by the participating bank based on its applicable lending rates and the applicant's credit profile. The rate may vary across financial institutions, so applicants should confirm the applicable interest rate with their lending bank before applying.
Repayment generally begins after a moratorium period determined by the bank. The repayment tenure typically ranges from 3 to 7 years, subject to the lender's terms and the project's repayment capacity. The government subsidy, also known as margin money, is kept in a separate account for a lock-in period of 3 years and is adjusted against the loan after the prescribed conditions are met.
If you are comparing financing options, you can also explore the Mudra Loan interest rate to understand how the two financing options differ. Under PMEGP, the eligible subsidy reduces the effective loan burden once it is adjusted in accordance with the scheme guidelines.
PMEGP loan details
Under PMEGP, the bank finances a portion of the eligible project cost, while the beneficiary contributes the prescribed share and the government provides a subsidy based on the applicant's category and project location.
- General category applicants must contribute 10% of the project cost, while the bank finances the remaining 90% before the subsidy adjustment.
- Special category applicants must contribute 5% of the project cost, while the bank finances the remaining 95% before the subsidy adjustment.
- The government provides a margin money subsidy ranging from 15% to 35% of the eligible project cost, depending on the beneficiary category and whether the project is located in a rural or urban area.
- The subsidy is kept under the prescribed lock-in conditions and adjusted against the loan after verification and fulfilment of the scheme requirements.
The bank loan amount and subsidy adjustment are subject to the applicable PMEGP guidelines. The subsidy is not paid directly to the applicant as unrestricted cash.
Types of Businesses Covered Under PMEGP
PMEGP supports eligible new micro-enterprises across various non-farm business activities. These may include:
- Food processing and other eligible agro-based industries
- Forest-based products
- Handmade paper and fibre products
- Mineral-based products
- Chemical and polymer-based products, subject to scheme restrictions
- Rural engineering and biotechnology-related activities
- Service-sector and textile industries
Eligibility depends on the nature of the proposed business and the activities permitted under the scheme. Applicants should check the latest PMEGP guidelines before preparing their project proposal.
For additional funding opportunities in the food processing sector, explore the PMFME scheme, which supports eligible micro food processing enterprises.
PMEGP negative list: businesses not covered
PMEGP does not provide assistance for activities included in its negative list. These restrictions may cover the following categories:
- Industries connected with the production, processing or sale of meat and certain intoxicant-related products, including beedi, pan, cigars and cigarettes, as specified in the guidelines.
- Activities related to cultivation, sericulture, horticulture and floriculture, subject to the scheme's provisions.
- Manufacturing polythene carry bags below the permitted thickness limit and containers made from recycled plastic, as specified in the guidelines.
- Processing of Pashmina wool and products involving hand spinning and hand weaving that fall under the Khadi Certification Rules.
- Certain rural transport activities, subject to specified exceptions for permitted vehicles and boats in designated regions.
The negative list and its exceptions may be revised. Applicants should consult the latest official PMEGP guidelines to confirm whether their proposed business qualifies for assistance.
Who can apply for a PMEGP loan?
PMEGP provides financial assistance to eligible applicants setting up new micro-enterprises. The following individuals and organisations may apply, subject to the scheme's eligibility conditions:
- Individuals above 18 years of age.
- Individuals who have passed at least Class 8 for manufacturing projects costing more than Rs. 10 lakh.
- Individuals who have passed at least Class 8 for service-sector projects costing more than Rs. 5 lakh.
- Self-help groups (SHGs), including those below the poverty line, provided they have not received benefits under another government scheme for the same purpose.
- Institutions registered under the Societies Registration Act, 1860.
- Production co-operative societies.
- Charitable trusts.
PMEGP assistance is intended for new projects. Existing units and applicants who have already received government subsidies for the same purpose may be ineligible, depending on the applicable scheme conditions. Applicants should review the current guidelines before submitting an application.
What are the documents required when making a PMEGP loan application?
Applicants need to submit the relevant documents to establish their identity, eligibility and business details when applying under the PMEGP scheme. The required documents may include:
- Aadhaar card
- PAN card
- Caste certificate, wherever applicable
- Special category certificate, wherever required
- Rural area certificate, wherever applicable
- Detailed project report
- Educational qualification certificate, EDP training certificate or skill development training certificate, as applicable
- Any other documents required by the implementing agency or lending bank
Applicants should check the latest PMEGP application guidelines to confirm the documents required for their category and proposed project.
How does financial assistance work under the PMEGP scheme?
Financial assistance under PMEGP consists of the beneficiary's own contribution, a government subsidy and bank finance. The beneficiary contributes 10% of the project cost under the general category or 5% under the special category. The government provides a margin money subsidy ranging from 15% to 35%, depending on the beneficiary category and project location, subject to scheme guidelines.
The bank finances the remaining eligible project cost after accounting for the applicable contribution and subsidy. Funding may cover term loan requirements and eligible working capital needs, depending on the project and the bank's assessment.
In addition to financial assistance, PMEGP supports eligible entrepreneurs through Entrepreneurship Development Programme (EDP) training, which helps them develop the skills needed to establish and manage their businesses.
PMEGP second loan for upgrading an existing unit
Existing units established under PMEGP, the Rural Employment Generation Programme (REGP) or the Pradhan Mantri Mudra Yojana (PMMY) may qualify for a second loan to upgrade or expand their operations, subject to the applicable scheme conditions.
| Detail | Manufacturing sector | Business or service sector |
| Own contribution | 10% of the project cost | 10% of the project cost |
| Subsidy | 15% of the project cost (20% in the North Eastern Region and hill states) | 15% of the project cost (20% in the North Eastern Region and hill states) |
| Maximum project cost eligible for subsidy | Rs. 1 crore | Rs. 25 lakh |
| Maximum subsidy | Rs. 15 lakh (Rs. 20 lakh in the North Eastern Region and hill states) | Rs. 3.75 lakh (Rs. 5 lakh in the North Eastern Region and hill states) |
The bank finances the remaining eligible project cost. If the proposed project cost exceeds Rs. 1 crore for manufacturing or Rs. 25 lakh for business or service activities, the bank may finance the additional amount without a government subsidy, subject to its lending policies and the applicable guidelines.
How to make a PMEGP online application?
Applicants can submit their applications through the official Khadi and Village Industries Commission (KVIC) PMEGP e-portal by following these steps:
- Visit the official PMEGP online application portal.
- Read the instructions and enter the required personal, educational and project-related details.
- Complete the application form and click on ‘Save Application Data’.
- Upload the required documents and review the information entered before submitting the application.
- After successful submission, note the Applicant ID and Password sent to your registered mobile number for future reference and application tracking.
Ensure that all details and documents are accurate before submitting the application.
PMEGP portal: what the KVIC e-portal offers
The PMEGP e-portal, managed by the Khadi and Village Industries Commission (KVIC), provides information and online services for applicants seeking assistance under the scheme.
Visit the official PMEGP e-portal to access the following resources:
- Online application form for new projects
- Frequently asked questions about PMEGP
- PMEGP scheme guidelines
- Sample project profiles to help applicants prepare business proposals
- Helpdesk information and contact details
After submitting your application, keep your Applicant ID and Password secure so you can access the portal and track your application status.
PMEGP vs Mudra Loan vs Startup India: Which scheme suits you?
PMEGP, Mudra Loan and Startup India support different business requirements. PMEGP is intended to help establish eligible new micro-enterprises through bank finance and a government subsidy. Mudra Loan supports eligible micro-businesses with funding for business activities and expansion, while Startup India supports innovation-driven, DPIIT-recognised startups through various initiatives and eligible funding programmes.
| Parameter | PMEGP Loan | Mudra Loan | Startup India |
| Maximum funding | Up to Rs. 50 lakh for manufacturing and Rs. 20 lakh for service or business projects | Up to Rs. 20 lakh under the Tarun Plus category for eligible borrowers who have successfully repaid a previous Tarun loan; other categories have lower limits | Varies by lender, investor and funding programme |
| Subsidy/credit support | Margin money subsidy of 15%–35%, depending on category and location | No direct capital subsidy under the standard scheme | Eligible startups may access credit guarantee support and other notified initiatives |
| Collateral requirement | Generally, no collateral for eligible loans up to Rs. 10 lakh; guarantee coverage may be available for eligible loans above this amount | Collateral is generally not required under the scheme, subject to applicable lending guidelines | Varies depending on the lender and funding source |
| Best suited for | Eligible new non-farm micro-enterprises | Micro and small businesses requiring funding for business activities, working capital or expansion | DPIIT-recognised startups with innovative business models |
| Implementing body | KVIC, KVIB and District Industries Centres (DICs), among other implementing agencies | Banks, NBFCs, microfinance institutions and other eligible lending institutions | Department for Promotion of Industry and Internal Trade (DPIIT) |
Choose the scheme that best matches your business stage, eligibility and funding requirements.
Conclusion
The PMEGP scheme helps eligible entrepreneurs establish new micro-enterprises through bank finance and government subsidies. However, the assistance available depends on the project's eligible cost, the beneficiary category and the scheme's conditions.
If you require additional funding for business expansion, working capital or other eligible business needs, you can also explore the Bajaj Finance Business Loan, which offers loans of up to Rs. 80 lakh at competitive interest rates. Eligible applicants can apply with minimal documentation and may receive disbursal within 48 hours* of loan approval, subject to the applicable terms and conditions.
To check your eligibility and access a personalised offer, review your pre-approved offer from Bajaj Finance.
