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

Learn how the Prime Minister's Employment Generation Programme (PMEGP) offers financial assistance to those who wish to set up new projects.
Business Loan
2 min read
7 September 2023

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.

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, 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

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.

How much subsidy can you get through the PMEGP loan scheme?

Beneficiary categories Beneficiary’s share (of total project) Urban subsidy rate Rural subsidy rate
General 10% 15% 25%
Special 5% 25% 35%

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 self-employment 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.

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.

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 Finserv 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.

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