A subsidy you keep, on up to 35% of project cost

What the PMEGP scheme is

The Prime Minister’s Employment Generation Programme (PMEGP) is a central government scheme administered by the Union Ministry of Micro, Small and Medium Enterprises. Its objective is to promote self-employment in rural and urban areas by providing a credit-linked subsidy to new self-employment ventures, micro-enterprises and projects.

The subsidy takes the form of margin money, ranging from 15% to 35% for new units of up to ₹50 lakh in manufacturing and up to ₹20 lakh in services. Where the project cost exceeds those limits, the balance credit can be availed from banks without government subsidy.

The scheme also offers a second PMEGP loan for expansion or upgradation of well-performing existing PMEGP or MUDRA units.

Scheme highlights

Repayment Tenure

3 years to 7 years

Age Criteria

Above 18 years

Maximum Project Cost

First PMEGP loan — ₹50 lakh for a manufacturing unit, ₹20 lakh for a service unit.
Second PMEGP loan — ₹1 crore for a manufacturing unit, ₹25 lakh for a service unit.

Subsidy on Project

From 15% to 35%

Subsidy Lock-in

3 years after successful physical verification

Education Qualification

At least Class 8 pass, to set up a project costing over ₹10 lakh in manufacturing or over ₹5 lakh in the service/business sector

How the scheme is administered

PMEGP is implemented by the Khadi and Village Industries Commission (KVIC) at the national level, and at state level through State Khadi and Village Industries Boards (KVIBs), KVIC state offices, the Coir Board for coir-related activities, District Industries Centres (DICs) and the banks.

The margin money subsidy is routed by KVIC to the financing bank’s branch through the nodal bank. The branch then credits the subsidy to the borrower’s account after the lock-in period ends, subject to the outcome of the physical verification report.

Rate of subsidy

For setting up a new enterprise

Swipe the table sideways to see all columns.

For upgrading an existing PMEGP, REGP or MUDRA unit (second loan)

Features of the scheme

Repayment tenure

Between 3 and 7 years, after an initial moratorium prescribed by the financing bank or institution.

Project cost composition

Capital expenditure, including the cost of construction, should account for up to 60% of total project cost, while working capital should be up to 40%. The financing bank can determine its own criteria for sanction based on the nature of the project.

Banks cover the balance of total project cost after your contribution. If the cost exceeds the ceiling, banks may provide the balance without government subsidy — for both new and existing units.

Collateral

Project cost of up to ₹10 lakh is free from collateral security under PMEGP loans.

Margin money subsidy conditions

• The subsidy is one-time assistance. It is not available for enhancement of credit limit, modernisation or expansion — except for units selected for upgradation through a second loan under the scheme.
• PMEGP units must be registered on the UDYAM portal before margin money is adjusted in the loan account.
• Projects financed jointly by two different banks or financial institutions are not eligible for margin money assistance.

EDP training — a mandatory step

Entrepreneurship Development Programme (EDP) training is mandatory for claiming margin money through the PMEGP e-portal.

Projects above ₹5 lakh

10 working days of EDP training

Projects up to ₹5 lakh

5 working days of EDP training

Projects up to ₹2 lakh

Training is not compulsory

The training involves interaction with successful rural entrepreneurs and banks, plus field visits. KVIC has developed an online module offering free 2-day EDP training to prospective entrepreneurs.

Eligibility criteria

For new enterprises

1. Minimum age — above 18 years.
2. Income criteria — none. There is no income requirement for setting up a project under PMEGP.
3. Education — at least Class 8 standard, to set up a project costing over ₹10 lakh in manufacturing or over ₹5 lakh in the service or business sector.
4. The loan is for new viable micro-enterprises including village industries projects, except activities prohibited by local government or authorities on environmental or socio-economic grounds, and those in the negative list.
5. Existing units, and units that have already availed a government subsidy such as PMRY, REGP, CMEGP, PMEGP or any other Central or State scheme, are not eligible.
6. Projects without capital expenditure (term loan) are not eligible.
7. The cost of land cannot be included in project cost. A pre-built shed, or long-term lease or rental for a workshed, can be included — but only for a maximum of 3 years.
8. All implementing agencies — KVIB, DIC, KVIC and Coir Board — can process applications in both rural and urban areas.
9. The applicant must have a valid Aadhaar number.
10. The applicant must consent to authentication of demographic details from the UIDAI server.
11. Only one person per family is eligible for a PMEGP loan. “Family” means self and spouse.

For upgrading existing PMEGP, REGP or MUDRA units

1. Margin money or subsidy claimed must have been successfully adjusted on completion of the 3-year lock-in period.
2. The first loan under PMEGP, REGP or MUDRA must be fully repaid within the stipulated time.
3. You may apply for the second loan from the same financing bank, or from any other bank willing to extend the facility.
4. The unit must have been profitable for the last 3 years, with potential for further growth in turnover and profit through modernising or upgrading technology.
5. Udyog Aadhaar Memorandum (UAM) registration is mandatory.
6. The second loan must generate additional employment.

Activities not allowed — the negative list

1. Any industry or business connected with meat (slaughtered) — processing, canning or serving items made of it as food; production, manufacture or sale of intoxicants such as cigars, beedi, pan or cigarettes; any hotel, dhaba or outlet serving liquor; preparing or producing tobacco as raw material; and tapping of toddy for sale.
   Serving or selling non-vegetarian food at hotels or dhabas is allowed.
2. Activities prohibited by local government or authorities on environmental or socio-economic grounds.
3. Manufacture of polythene carry bags of less than 75 microns, and carry bags or containers made of recycled plastic for carrying, dispensing, storing or packaging foodstuff or any other item causing environmental problems. Thickness is governed by the Ministry of Environment, Forest and Climate Change plastic waste management rules as amended.
4. Any industry or business connected with cultivation of crops or plantations such as tea, coffee or rubber, and horticulture, floriculture, animal husbandry or sericulture (cocoon rearing).
   Value addition under these categories is allowed, as are off-farm and farm-linked activities connected with horticulture, sericulture, floriculture and similar.

Animal husbandry activities that are allowed

• Dairy — milk and other dairy products through cows primarily, plus sheep, goats, horses, camels, buffaloes and donkeys.
• Poultry — kept for eggs and meat, including turkeys, geese, chickens and ducks.
• Aquaculture — farming of aquatic organisms including molluscs, crustaceans, fish and aquatic plants.
• Insects — including bees and sericulture.

Documents required

The following scanned documents, up to 1 MB each, are needed for the online PMEGP application:

1. Passport-size photo.
2. Project report summary or detailed project report.
3. Highest educational qualification.
4. Rural area certificate, if applicable.
5. Social or special category certificate, if applicable.

Additional documents for a second loan on an existing unit

1. Previous loan sanction letter issued by the bank.
2. Proof of margin money claims adjusted against the previous loan, and a bank certificate of full loan repayment.
3. Project report for expansion or upgradation of the unit.
4. Passport-size photograph.
5. Last 3 years’ ITR returns.
6. Last 3 years’ annual accounts certified by a chartered accountant.