Government of India launched the Prime Minister’s Employment Generation Programme (PMEGP) in 2008. The PMEGP scheme is a subsidy scheme and was introduced by merging two schemes that were in operation until 31 March 2008, namely Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP).

PMEGP is a central government scheme being administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME). It is being implemented by Khadi and Village Industries Commission (KVIC).

What is the PMEGP loan scheme?

PMEGP is a credit linked subsidy programme that aims to generate employment opportunities through the establishment of small businesses in the non-farm sector for rural and urban areas. It focusses on bringing together widely dispersed traditional artisans and rural and urban unemployed youth to give them self-employment opportunities.

With the PMEGP loan scheme, government seeks to reduce the migration of rural youth to urban areas with this scheme and bring socio-economic development in backward areas.

Under PMEGP, beneficiaries can get project cost subsidies between 15% and 35% enabling small scale industry businesses and entrepreneurs avail credit to initiate and grow their ventures.

What is the name of PMEGP?

PMEGP full form stands for Prime Minister’s Employment Generation Programme, which is a credit linked subsidy scheme.

Who are the beneficiaries of PMEGP?

Let’s understand who can apply for PMEGP scheme. The beneficiaries of PMEGP scheme includes:

• Any individual (Indian) over 18 years of age
• Education level – At least VIII standard qualified (for setting up projects above ₹10 lakhs in the manufacturing sector and ₹5 lakhs in the services/business sector)
• Only applicable to new projects
• Self Help Groups (SHG)*, institutions registered under Societies Registration Act, 1860; Production Co-operatives Societies, Charitable Trusts are also eligible (*T&C apply)
• Maximum project cost – ₹50 lakhs in the manufacturing sector and ₹20 lakhs in the services sector

The PMEGP scheme aims to offer a subsidy for two activities:

• Setting up of new micro enterprises
• Upgrading for 2^nd loan for existing units under REGP/PMEGP/MUDRA scheme

The government will extend a subsidy to beneficiaries for these two activities. The subsidy will be a percentage of the total project cost. The remaining amount can be taken from banks authorised by KVIC for the PMEGP scheme as term loans.

How much is PMEGP subsidy?

The PMEGP scheme is structured in a way that the individual/applicant has to furnish 5% – 10% of the project cost on their own, and the remaining amount can be availed through banks approved under the scheme.

• Maximum project cost for manufacturing: Up to ₹50 lakhs
• Maximum project cost for services: Up to ₹20 lakhs

For 2^nd loan upgrade projects (e.g., upgrade for MUDRA loan scheme), maximum PMEGP subsidy will be provided for – up to ₹1 crore for manufacturing sector and ₹25 lakhs for services sector.

Categories of beneficiaries and rates of subsidy:

Setting up of micro enterprises

* Special category includes SC, ST, OBC, minorities, women, ex-servicemen, transgenders, differently abled, NER, aspirational districts, hill and border areas (as notified by the Government), etc.

The maximum cost of projects under the manufacturing sector should be ₹50 lakh and the maximum cost of the projects under services sector should be ₹20 lakh.

Upgrading existing PMEFGP/REGP/MUDRA units

The maximum cost of the projects under manufacturing sector for upgradation should be ₹1 Crore and the maximum subsidy would be ₹15 lakh (₹20 lakh for NER and Hill States). The maximum cost of the projects under the services sector for upgrading existing units should ₹25 Iakh and the maximum subsidy would be ₹3.75 lakh (₹5 lakh for NER and Hill States).

(Source: //msme.gov.in/1-prime-ministers-employment-generation-programme-pmegp)

Also read: CETPs MSME scheme – Benefits, guidelines, documents, eligibility

What is PMEGP loan limit?

The maximum loan limit for PMEGP scheme is up to 90% – 95% of project cost.

The maximum project cost is ₹50 lakhs for manufacturing and ₹20 lakhs for services. The components of project cost includes:

• Capital expenditure loan (term loan), working capital and 10% of project cost as own contribution (General category) and 5% contribution (for special category)

For example, for a ₹50 lakh project cost, the break down will look like:

• 10% individual contribution: ₹5 lakhs
• 70% bank finance in the form of term loan and working capital: ₹35 lakhs
• 20% PMEGP loan subsidy (margin money): ₹10 lakhs

What is the PMEGP loan scheme interest rate?

The PMEGP loan scheme interest rate varies between lenders. In general it ranges between: 10.8% to 12%.

Is collateral required for PMEGP scheme?

As per RBI guidelines, for projects costing up to ₹10 lakhs do not require collateral under the PMEGP scheme. For projects above ₹10 lakhs, specific lenders might require collateral.

There’s also coverage under the CGTMTSE scheme. Ensure to check these details with your lender.

Who is eligible for PMEGP scheme?

The PMEGP scheme eligibility criteria are different for individuals planning to set up a new enterprise and units seeking to upgrade their existing PMEFGP/REGP/MUDRA units.

Eligibility for setting up new units

• Individuals should be above 18 years of age.
• For setting up of projects costing above ₹10 lakh in the manufacturing sector and above ₹5 lakh in the service sector, the beneficiaries should possess at least VIII standard pass educational qualification.
• Projects without capital expenditure are not eligible for PMEGP loan scheme.
• Only one person from one family is eligible for subsidy for setting up of projects under PMEGP. ‘Family’ includes self and spouse.

Eligibility for upgrading existing PMEFGP/REGP/MUDRA units

• The subsidy under PMEGP scheme that has been claimed by a unit must be successfully adjusted after completing 3 years (lock in period).
• First loan under PMEGP/REGP/MUDRA must be successfully repaid within the stipulated time.
• The unit must be profit making with good turnover and have potential for further growth in terms of turnover and profit with modernisation/upgrading the technology.

Which business is under PMEGP?

The employment generation scheme is for new micro business units only. Some of the business ventures admissible under the PMEGP scheme are:

• Trading activities in the form of sales outlets
• Retail outlets selling Khadi products, Village Industry products procured from Khadi and Village Industry Institutions certified by KVIC
• Retail outlets/business selling products manufactured by PMEGP units and clusters set up under the SFURTI scheme
• Retail outlets backed by manufacturing (including processing)/service facilities
• Transport activities viz purchase of Cab/Boat/Motorboat/Shikara etc., for transportation of tourists or public

Which activities/businesses are not eligible for PMEGP scheme?

There is a negative list of activities that are not permitted according to the PMEGP scheme guidelines.

• Processing, canning and/or serving items made of meat.
• Manufacturing or sale of intoxicant items like beedi/pan/ cigar/cigarette.
• Sales outlet serving liquor.
• Activities prohibited by local government/authorities keeping in view environment or socio-economic factors.
• Manufacturing of polythene carry bags of less than 75 microns thickness and I manufacture of carry bags or containers made of recycled plastic for storing, carrying, dispensing or packaging of food stuff and any other item which causes environmental problems.
• Any Industry/Business connected with the cultivation of crops or plantations like tea, coffee, rubber etc. sericulture (cocoon rearing), horticulture, and floriculture.

What are the documents required for PMEGP scheme?

Given below are the documents required to apply for scheme:

• Highest educational qualification certificate
• Project report summary/detailed project report
• Social/Special category certificate, if applicable
• Rural area certificate if applicable

How to apply for PMEGP scheme?

PMEGP scheme has a specific portal hosted by the KVIC for inviting project applications from entrepreneurs. There are separate options for applying for new units and upgrading existing ones. Applying for PMEGP scheme includes four steps:

Step 1: Visit PMEGP portal: www.kviconline.gov.in/pmegpeportal

Step 2: Click on ‘Application for new unit’ or ‘Application for existing unit’

Step 3: Fill in the application form

Step 4: Click on ‘Save applicant data’

Step 5: Upload required documents

Step 6: Click on ‘Final submission to sponsoring agency’

Do note that the details filled in on the application cannot be modified once it is submitted.

Which bank gives a PMEGP loan?

There are several public sector banks, regional rural banks, private banks and cooperative banks from where you can avail PMEGP loans for your enterprises. Here are some of the notable names you can consider:

Public Sector Undertaking banks:

• Bank of Baroda
• Bank of India
• Canara Bank
• Punjab National Bank
• Union Bank of India
• Indian Overseas Bank

Regional Rural Banks:

• Andhra Pradesh Grameena Vikas Bank
• Arunachal Pradesh Rural Bank
• Baroda Gujarat Gramin Bank
• Chhattisgarh Rajya Gramin Bank
• Karnataka Gramin Bank
• Saurashtra Gramin Bank

Private sector banks:

• HDFC Bank
• Axis Bank
• ICICI Bank
• Federal Bank
• IDFC First Bank
• Karur Vysya Bank

Cooperative Banks:

• Jharkhand State Co-Op Bank
• The Andhra Pradesh State Co-Operative Bank Ltd.
• NKGSB Co-operative Bank
• The Ajara Urban Co-Op. Bank Ltd

For more details, visit the official website and check the list of banks to avail PMEGP loan subsidy.

There other government loan schemes, like PSB Loan in 59 minutes, CLCSS scheme, Stand-up India scheme, etc., that MSMEs and entrepreneurs can explore for getting the necessary financing from the government. Participating in government schemes can also improve your business goodwill and pave the way to getting selected for more government schemes in the future.

*For information only. All are advised to visit the official websites of KVIC and PMEGP and the respective lending banks for more details and clarity.

Author: Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.