The Prime Minister’s Employment Generation Programme or PMEGP is one of the most significant government schemes in India for aspiring entrepreneurs who want to start or expand a small business but lack the capital to do so. Under this scheme, the government provides a substantial credit-linked subsidy of 15% to 35% of the project cost through the Khadi and Village Industries Commission (KVIC). Understanding how the PMEGP scheme works and how to successfully claim your subsidy can be the foundation of your entrepreneurial journey.
What is PMEGP?
PMEGP is a central government scheme administered by the Ministry of Micro, Small and Medium Enterprises through KVIC, Khadi and Village Industries Boards at the state level, and the District Industries Centres. The scheme provides financial assistance to individuals and groups who want to set up new micro-enterprises in the manufacturing, service, and trading sectors. The scheme combines a bank loan with a government subsidy, making business finance accessible to individuals who would otherwise not qualify for adequate funding.
Subsidy Structure Under PMEGP
The subsidy amount under PMEGP varies based on the category of the beneficiary and the location of the proposed enterprise:
- General Category in Urban Areas: 15% subsidy on project cost
- General Category in Rural Areas: 25% subsidy on project cost
- Special Category (SC, ST, OBC, Minorities, Women, Ex-Servicemen, Physically Handicapped, NER, Hill and Border Areas) in Urban Areas: 25% subsidy
- Special Category in Rural Areas: 35% subsidy on project cost
The maximum project cost eligible under PMEGP is Rs. 50 lakh for manufacturing units and Rs. 20 lakh for service units. The beneficiary must contribute a minimum of 5 to 10% of the project cost as own contribution, and the balance is funded through a bank loan with the subsidy component locked in as margin money.
Eligibility Criteria
- Any individual above 18 years of age with at least Class 8 education pass for projects costing above Rs. 10 lakh in manufacturing and Rs. 5 lakh in the business and service sector
- Self Help Groups, institutions registered under the Societies Registration Act, production cooperative societies, and charitable trusts are also eligible
- The beneficiary must not have availed of any subsidy benefit under any other central or state government scheme
- Existing enterprises and units that have already availed benefit under PMRY, REGP, or any other scheme are not eligible
How to Apply for PMEGP
Applications for PMEGP are submitted online through the KVIC portal at kviconline.gov.in. The applicant must register on the portal, fill in the application form with personal details, educational qualifications, project details, and bank account information, and upload the required documents. The application is processed by the District Industry Centre or KVIC district office which evaluates the project and forwards eligible applications to the designated bank for loan sanctioning.
How the Subsidy is Credited
The PMEGP subsidy is not given directly to the beneficiary as cash. It is kept as a Term Deposit Receipt in the borrower’s loan account with the bank for the first three years. During this period, it serves as the margin money for the loan and earns interest. After the borrower successfully operates the enterprise for three years and meets the bank’s performance criteria, the subsidy is adjusted against the outstanding loan amount.
Documents Required
- Aadhaar card and PAN card of the applicant
- Educational qualification certificates
- Caste or category certificate if applicable for special category benefits
- Detailed project report including cost of project, means of finance, and expected profitability
- Proof of residence and bank account details
FAQs
Q: Can I apply for PMEGP for an existing business?
A: PMEGP is primarily designed for new enterprises. However, there is a provision for second loans under PMEGP for existing units that have successfully completed three years of operation under the scheme and are looking to expand. The subsidy for the second loan is 15% for general and 20% for special category beneficiaries.
Q: What happens if I close my business before three years?
A: If you close your business within the three-year lock-in period, the subsidy amount which has been held as a Term Deposit Receipt is forfeited and adjusted against the outstanding loan. You will need to repay the full bank loan without the benefit of the subsidy.
Q: How long does it take to get PMEGP loan approval?
A: The timeline from application to loan disbursement varies but typically takes 2 to 4 months. The DIC or KVIC office reviews and recommends the application within 30 to 45 days and the bank then processes and sanctions the loan.
Q: Which banks participate in the PMEGP scheme?
A: All scheduled commercial banks, regional rural banks, and cooperative banks participate in the PMEGP scheme. Public sector banks like State Bank of India, Bank of Baroda, Punjab National Bank, and Canara Bank are among the most active lenders under this scheme.
Q: Is there a training requirement under PMEGP?
A: Yes. PMEGP beneficiaries are required to undergo Entrepreneurship Development Programme training before the loan is disbursed. The training programme is typically conducted by KVIC or KVIB and covers basic business skills, financial management, and technical knowledge relevant to the project.
