Prime Minister’s Employment Generation Program (PMEGP) Loan Scheme

PMEGP offers a government subsidy of 15%-35% on project costs up to Rs. 50 lakh. Explore loan eligibility, interest rate (11%-12%), and how to apply online.
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July 17, 2026

The Prime Minister Employment Generation Programme (PMEGP) is a Government of India-backed credit-linked 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. If you are looking for more funding opportunities, you can explore Mudra Loan, a government-backed initiative that supports micro and small businesses with financial assistance.

In summary

A PMEGP loan is a government-backed financing option that helps eligible entrepreneurs establish new micro-enterprises through a combination of bank credit and capital subsidy. The PMEGP scheme supports both manufacturing and service businesses, making it easier to start a venture with lower upfront financial burden.

  • Scheme purpose: The PMEGP scheme is a Government of India credit-linked subsidy programme that promotes new micro-enterprises in the non-farm sector through financial assistance.
  • Subsidy benefits: Eligible applicants can receive a subsidy of 15%–35% of the project cost. General category applicants receive 15% (urban) or 25% (rural), while special category applicants receive 25% (urban) or 35% (rural).
  • Project cost limits: The maximum eligible project cost is Rs. 50 lakh for manufacturing enterprises and Rs. 20 lakh for service or business enterprises.
  • Interest and repayment: The PMEGP loan interest rate follows the lending bank's regular MSE rates, typically around 11%–12% per annum, with repayment generally extending up to 3 years after a 6-month moratorium, subject to bank terms.
  • Eligibility and implementation: Individuals aged 18 years and above, Self-Help Groups (SHGs), co-operative societies, and charitable trusts can apply. For projects above Rs. 10 lakh in manufacturing and Rs. 5 lakh in services, applicants should have passed at least the 8th standard. The scheme is implemented nationally by KVIC and through KVIBs and District Industries Centres (DICs).

If you need funding beyond the PMEGP limits or are not eligible under the scheme, you can also explore a Bajaj Finance Business Loan to support your business growth.

Objectives of the PMEGP Scheme

  • To create jobs in India's urban and rural areas by launching new self-employment programmes, micro-enterprises, 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.

Benefits of PMEGP scheme

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 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 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 categoryOwn shareUrban subsidyRural subsidy
General category10%15%25%
Special category (SC/ST/OBC/Minorities/Women/Ex-servicemen/Persons with Disabilities/NER, 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.

What is the PMEGP loan limit?

The PMEGP loan limit depends on the type of business, with eligible projects receiving financial assistance for project costs of up to Rs. 50 lakh in the manufacturing sector and up to Rs. 20 lakh in the service or business sector. The final bank loan is calculated after deducting the beneficiary's contribution and the applicable government subsidy. The sanctioned amount can be used for both term loan requirements and eligible working capital needs as per the scheme guidelines.

SectorMax project costBeneficiary contributionBank loan coverage
ManufacturingRs. 50 lakhGeneral: 10%
Special: 5%		Approximately 60%–75% of the project cost (after adjusting subsidy and own contribution)
Service/BusinessRs. 20 lakhGeneral: 10%
Special: 5%		Approximately 60%–75% of the project cost (after adjusting subsidy and own contribution)
Subsidy (Margin Money)General: 15%–25%
Special: 25%–35%		Not applicableLocked in for 3 years as per scheme guidelines

It is important to note that the maximum project cost is not the same as the loan amount disbursed. The bank finances the eligible balance after accounting for the beneficiary's contribution and the applicable subsidy. The applicable PMEGP loan interest rate is charged only on the bank-financed portion of the project cost, not on the subsidy amount.

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?

The PMEGP loan interest rate is generally around 11%-12% per annum, in line with the regular lending rates applicable to the Micro and Small Enterprise (MSE) sector. Since the PMEGP loan is sanctioned through participating banks, the final interest rate may vary slightly depending on the lending institution's policies and the applicant's credit profile.

Under the PMEGP loan, borrowers typically receive a grace period of around 6 months before repayment begins. After the moratorium, the loan is generally repaid over a period of up to 3 years, subject to the bank's terms and the project's cash flow. The government subsidy (margin money) is kept in a separate savings account and remains locked in for 3 years before being adjusted against the outstanding loan amount, provided the project complies with the scheme guidelines.

If you are comparing financing options, you may also want to understand the Mudra Loan interest rate, as the two schemes cater to different borrower requirements. Under the PMEGP scheme, the subsidy reduces the overall borrowing cost over time, even though interest is charged only on the bank-financed portion of the project cost.

PMEGP loan details

PMEGP Loan Distribution

After the application is approved:

  • The bank gives 95% of the project cost for applicants from weaker sections
  • 90% for general category applicants

Out of this, 15% to 35% is provided as a government subsidy (extra support money). The bank only takes back the actual loan amount from the applicant. Any remaining unused subsidy is returned by the local KVIC office to the applicant’s card/account.

The rest of the amount (after subtracting the subsidy from 90% or 95%) is given by the bank as a PMEGP business loan.

Interest Rate

The interest rate on the PMEGP loan is the same as regular loans given to the Micro and Small Enterprises (MSE) sector.

Loan Repayment Period

After a grace period (usually over 6 months), the borrower may be given 3 years to repay the loan.

Subsidy Account

The subsidy (also called margin money) is kept in a separate savings account linked to the loan account. It stays locked for 3 years. After that, it is either adjusted against the loan or released.

Working Capital Requirement

The borrower must use the working capital limit at least once every 3 years after the subsidy is locked. At least 75% of the credit limit should be used.

Types of Businesses Covered Under PMEGP

PMEGP loans can be given to businesses in the following areas:

  • Food processing (agriculture-based)
  • Forest products
  • Handmade paper and fibre
  • Mineral-based products
  • Chemical and polymer-based products
  • Rural engineering and biotech
  • Service and textile industries

For additional funding opportunities, explore the pmfme scheme, which supports micro-enterprises in food processing.

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.

Documentation required for the PMEGP scheme

  • Aadhaar card, PAN card
  • Caste certificate
  • Special category certificate, wherever required
  • Rural area certificate
  • Project report
  • Education/EDP/Skill Development training certificate.
  • Any other documents can also be requested on a case-to-case basis. 

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:

  • Caste Certificate
  • Special Category Certificate, wherever required
  • Rural Area certificate
  • Project Report
  • Education/ EDP/ Skill Development training certificate
  • Any other applicable document

How does financial assistance work under the PMEGP scheme?

Under the PMEGP scheme, the Government of India provides a subsidy of 15%–35% of the approved project cost as margin money, while the remaining amount is financed through a bank loan. The subsidy percentage depends on the applicant's category and whether the project is located in an urban or rural area.

The PMEGP loan is structured with the beneficiary's own contribution, the government subsidy, and bank finance. The bank generally sanctions the remaining eligible amount as a Term Loan, while eligible Working Capital requirements may also be financed based on the project's needs and the bank's assessment. The applicable PMEGP loan interest rate is charged only on the bank-financed portion and not on the subsidy amount.

Apart from financial assistance, the scheme also supports entrepreneurs through mandatory Entrepreneurship Development Programme (EDP) training, helping applicants build the skills needed to establish and manage their businesses successfully.

How to make a PMEGP online application?

  • Step 1: Go to the official PMEGP website (Khadi and Village Industries Commission) to fill out the form online. You can also visit: https://www.kviconline.gov.in/pmegpeportal/jsp/pmegponline.jsp
  • Step 2: Read the instructions carefully and fill in all the required details, including your personal information.
  • Step 3: Once the form is filled out, click on ‘Save Application Data’ to save your information.
  • Step 4: After saving, upload the required documents to complete your application.
  • Step 5: Once the application is successfully submitted, you will receive your Applicant ID and Password on your registered mobile number.

PMEGP vs Mudra Loan vs Startup India: Which scheme suits you?

The PMEGP scheme, Mudra Loan, and Startup India each support different stages of business growth. PMEGP is ideal for new micro-enterprises, Mudra Loan suits small businesses requiring modest funding, while Startup India is designed for innovation-driven, DPIIT-recognised startups seeking long-term growth.

ParameterPMEGP LoanMudra LoanStartup India
Maximum fundingUp to Rs. 50 lakh (manufacturing)Up to Rs. 20 lakh (services)Up to Rs. 10 lakh (Tarun category)Varies based on lender, investor, and funding programme
Subsidy/Credit support15%–35% capital subsidyNo subsidyEligible startups can access credit guarantee support under notified schemes
Collateral requirementGenerally no collateral up to Rs. 10 lakh; CGTMSE coverage may apply above this limitNo collateral requiredVaries depending on the lender and funding source
Best suited forNew non-farm micro-enterprisesMicro and small businesses requiring working capital or expansion financeDPIIT-recognised startups with innovative business models
Implementing bodyKVIC, KVIB, and DICBanks, NBFCs, and Micro Finance InstitutionsDepartment for Promotion of Industry and Internal Trade (DPIIT)

Choose the scheme that best matches your business stage and funding needs. If you require additional capital beyond government scheme limits, you can also explore a Bajaj Finance Business Loan to support your business expansion.

Conclusion

The PMEGP scheme helps beneficiaries set up new projects but is nevertheless limited in its funding. To gain additional hassle-free funding without collateral, consider the Bajaj Finance Business Loan. Here you get financing of up to Rs. 80 lakh at economic interest rates. Further, you can apply for this loan with just a few documents and get a swift 48 hours* loan disbursal once your application is approved.

To streamline your application and simplify the eligibility terms, check your pre-approved offer from Bajaj Finance. Doing so gives you a personalised deal and helps you boost your business quickly.

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Frequently asked questions

What is a PMEGP subsidy?

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.

What is the maximum project cost allowed under PMEGP?

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.

Which businesses come under PMEGP?

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.

How long does it take to get a PMEGP loan?

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.

Who is eligible under PMEGP?

Under the Prime Minister's Employment Generation Programme (PMEGP), individuals aged 18 and above who have passed at least 8th standard are eligible to apply for loans to start their own microenterprise ventures. This scheme is available to all sectors except for those that fall under the agricultural category.

What is the maximum loan limit for PMEGP?

Under the Prime Minister's Employment Generation Programme (PMEGP), the maximum loan limit is Rs. 25 lakh for manufacturing businesses and Rs. 10 lakh for the service sector. This loan typically carries a lower interest rate than other loans and can be used for working capital, machinery purchase, or facility construction purposes, among others.

Is PMEGP loan interest free?

The PMEGP loan is not interest-free. The interest rate varies depending on the lending institution and the loan amount. However, the government provides a subsidy of up to 15% of the project cost for general category applicants and up to 25% of the project cost for women, SC/ST, or differently abled entrepreneurs.

What activities are covered under PMEGP?

PMEGP covers various small-scale entrepreneurial activities such as manufacturing, service, and business enterprises.

Who is not eligible for the PMEGP Loan scheme?

Individuals who hold more than 25% ownership in any existing business or industry, are part of more than one business activity, or have availed financial assistance from any other scheme are not eligible for the PMEGP loan scheme.

What is the maximum subsidy for a PMEGP second loan?

The maximum subsidy for a second loan under the PMEGP scheme is limited to 25% of the project cost or Rs. 1 lakh, whichever is less.

Can I apply for the PMEGP Loan Scheme online?

Yes, interested candidates can apply online for the PMEGP loan scheme by visiting the official website of the KVIC or the KVIB in their respective state.

What is the minimum CIBIL score for a PMEGP loan?

There is no minimum CIBIL score requirement stated explicitly for the PMEGP loan scheme as of now. However, creditworthiness and a healthy credit score can impact the approval rate for loans.

How to apply for a PMEGP loan with minimal documentation?

You can apply for a PMEGP loan with just 5–6 core documents by submitting your application online through the KVIC e-portal. To simplify the process, keep all required documents ready before you begin.

Can PMEGP help in generating employment opportunities in rural areas?

Yes. The PMEGP scheme actively promotes employment generation in rural areas by offering higher subsidy rates of 25%–35%, encouraging entrepreneurs to establish new micro-enterprises outside urban centres.

Under PMEGP, rural beneficiaries receive higher financial support than urban applicants, reducing the initial investment required to start a business. For Special category applicants, the own contribution is only 5% of the project cost, while General category applicants contribute 10%. KVIC, along with KVIBs and District Industries Centres (DICs), implements the scheme across rural India to promote self-employment and local enterprise development.

According to KVIC's annual reports, the PMEGP scheme has generated lakhs of employment opportunities across the country by supporting new business ventures in both rural and urban areas.

Which cities and states in India have seen maximum job creation under PMEGP?

States such as Uttar Pradesh, Maharashtra, Gujarat, Tamil Nadu, and West Bengal have consistently been among the leading beneficiaries under PMEGP, recording a high number of sanctioned projects and employment opportunities. 

What is the best investment option under the PMEGP scheme?

Under the PMEGP scheme, some of the most promising project categories include food processing, textile manufacturing, and rural engineering, as they have consistently shown strong demand and employment potential. Here, "investment" refers to the project cost of your business rather than financial investment products. Depending on your skills, local demand, and market opportunities, these sectors can offer sustainable long-term business growth.

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