What is the PMEGP Loan Scheme?
The Prime Minister Employment Generation Programme (PMEGP) is a credit-linked subsidy scheme supported by the Government of India. PMEGP is a Ministry of Micro, Small, and Medium Enterprises initiative that is being implemented at the national level by the Khadi and Village Industries Commission (KVIC). This scheme can provide you with the financial assistance needed to start a new project as an entrepreneur.
The PMEGP scheme incorporates two previous schemes: the Prime Minister's Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP), which worked similarly to generate employment for the youth. Under this scheme, the beneficiary is only required to invest 5-10% of the project cost, while the government provides a subsidy of 15-35 % of the project cost based on various criteria. The remaining funds are provided to the entrepreneur as term loans by the participating banks.
The scheme is implemented by the Khadi and Village Industries Commission (KVIC), which serves as the national nodal agency. The scheme is implemented at the state level by State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs), District Industries Centres (DICs), and banks. In such cases, KVIC routes government subsidies through designated banks for eventual disbursement directly into the beneficiaries bank accounts.
What are the Objectives of the PMEGP Loan Yojana?
The PMEGP loan scheme has four objectives:
- To create jobs in rural and urban areas of India by establishing new self-employment micro-enterprises or projects.
- To create a common ground for widely dispersed traditional artisans and unemployed youth in rural and urban areas to come together and create self-employment opportunities.
- To take steps to prevent rural people from migrating to cities in search of work by providing them with stable and long-term employment.
- Increase the income earning capacity of artisans while focusing on increasing the rate of rural and urban employment growth.
PMEGP Loan Scheme Details
Let us look at the various aspects of the PMEGP Loan, from the percentage share of funds allocated to each party to the interest rate and tenure.
- Loan Allocation
The breakup of the amount disbursed under a PMEGP loan is as follows:
- Once the application is approved, the bank allocates 95% of the project cost (for the poorer sections of society) or 90% of the project cost (for general applicants).
- The government provides margin money or subsidy of 15-35% of this amount. The amount of margin money taken by banks will be proportional to the applicant's actual capital expenditure. The remaining margin money will be returned to the Khadi and Village Industries Commission in proportion to the amount not used (KVIC).
- The bank provides the remainder of the funds as a term loan or PMEGP loan.
The PMEGP scheme has set different maximum project costs for manufacturing and service sectors in accordance with the Micro, Small, and Medium Enterprises.
|Sector||Project cost (maximum)|
|Service||Rs. 10 lakh|
|Manufacturing||Rs. 25 lakh|
The maximum limit for self-investment under the PMEGP Loan scheme has been set based on the enterprise or project's location.
|Location||Project cost (maximum)|
|Plain area||Rs. 1 lakh|
|Hilly area||Rs. 1.5 lakh|
The PMEGP loan term ranges from three to seven years. Due to the current pandemic situation, PMEGP loan providers have offered a 6-month moratorium on all loans taken under the PMEGP scheme. Following an initial moratorium, the bank may provide borrowers with a three-year repayment schedule to repay the loan.
The subsidy is locked-in in a separate savings account linked to the loan account for three years before being adjusted with the PMEGP loan or released. For the PMEGP loan, the working capital expenditure must be equal to the cash credit limit at least once in the three years following the lock-in of the subsidy. Furthermore, the sanctioned limit should not be used less than 75% of the time.
Organizations in the following sectors can get a loan under the PMEGP scheme:
- Agriculture-based food processing
- Forest-derived products
- Handmade paper and fibre
- Mineral-based products
- Chemical and polymer-based products
- Biotech and rural engineering
Subsidy under PMEGP Loan Scheme
Beneficiaries of the PMEGP project are required to pay a minimum portion of the project cost and receive a subsidy on loans obtained from banks affiliated with the scheme. The subsidy is determined based on the applicant's category and area of residence. The subsidy provided under this scheme is known as margin money, and any excess margin money is credited back to the Khadi and Village Industries Commission.
|Category||Beneficiary’s share (Percentage of total project cost)||Share offered by the bank (Percentage of total project cost)||Subsidy rate(Urban areas)||Subsidy rate(Rural areas)|
*The special category includes SC, ST, OBS, minorities, ex-servicemen, PwD, and the people living in hilly and border areas.
PMEGP Loan Interest Rate
The PMEGP loan scheme has annual interest rates ranging from 11% to 12%. The Interest Subsidy Eligibility Certificate scheme, on the other hand, offers low-interest rates of 4%. The Khadi and Village Industries Commission adjusts the difference between the modified interest rate of 4% and the regular interest rate of 11% to 12%. However, the adjusted interest rate of 4% is only available to businesses that deal with Khadi and/or Polyvastra products.
PMEGP Loan Eligibility Criteria
Individuals and other organisations that meet the specified criteria for a term loan are eligible for the PMEGP loan. The eligible entities that can apply for a loan under the PMEGP are listed below:
- Individuals over the age of 18 (the beneficiary must have passed at least class 8 if he/she wants to use the PMEGP loan to establish a manufacturing unit costing more than Rs. 10 lakh or a service unit costing more than Rs. 5 lakh)
- Societies marked under the Societies Registration Act of 1860
- Self-help groups (if they have not received any benefits of other social welfare schemes)
- Charitable Trusts
- Co-operative societies involved in the production
Documents Required for PMEGP Loan
When applying for a PMEGP loan, the following documents are required:
- PAN card
- Aadhaar card
- Project report
- Class VIII pass certificate
- Address proof
- Special category certificate (if required)
- SC/ST/OBC/Minority/Ex-Servicemen certificate
- Entrepreneur Development Programme (EDP) training certificate
- Academic and technical certification
How to Apply for a PMEGP Scheme Loan?
Individual and non-individual applicants can submit PMEGP applications through the Prime Minister Employment Generation Programme's official portal. Simply follow the steps mentioned below to apply for a loan:
- To fill out the form online, go to the PMEGP website (Khadi and Village Industries Commission website) or click here.
- Once on the home page, select either the ‘Online Application form for Individuals' or the ‘Online Application form for Non-individuals' option.
- Enter all the required details in the form.
- After filling out all of the required information, click on the ‘Save Applicant Data’ tab.
- Submit the form after uploading all the required documents.
- Following successful submission, an acknowledgement ID and password will be sent to the applicant's registered mobile number.
For non-individual applicants-
After visiting the official website and selecting the ‘Online Application form for Non-individuals' option, the applicant must choose a category from ‘Self-help Groups,' ‘Trusts,' ‘Regd. Institutions,' and ‘Co-operative Societies.' The components of the above-mentioned categories' forms will differ.
How to Check PMEGP Loan Application Status?
Follow the steps given below to check the status of your PMEGP loan application:
- Go to the PMEGP official website or click here.
- Click on ‘Login Form for Registered Applicant' to open a new page with login and password fields.
- Enter your ID and password. Click on the ‘Login’ tab.
- Click on ‘View Status' to check the status of your PMEGP loan application.
PMEGP Loan Scheme FAQs
PMEGP is the acronym for Prime Minister's Employment Generation Programme.
The maximum cost is Rs. 25 lakh for a manufacturing unit and Rs. 10 lakh for a service unit.
No collateral is required for projects under the PMEGP scheme costing up to Rs. 10 lakh.
To know more about the list of businesses covered by the PMEGP, click here.
Please check the ‘PMEGP loan eligibility criteria’ section above for more information.
The applicant must be at least 18 years of age. There is no upper age limit.