PMEGP Loan

PMEGP Loan Scheme Key Highlights

What is PMEGP Loan (Prime Minister's Employment Generation Programme)?

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

The subsidy is offered in the form of margin money subsidy, which ranges from 15% to 35% for new units/projects of up to Rs 50 lakh in the manufacturing segment and up to Rs 20 lakh in the services segment. In case of units where the total project cost exceeds Rs. 50 lakh for the manufacturing segment and Rs. 20 lakhs for the services segment, the balance credit can be availed from the banks without any Government subsidy.

In case of the second loan sanctioned to existing PMEGP units for their upgradation, the maximum cost of the project/unit eligible for Margin Money subsidy is Rs 1 crore for the manufacturing segment and Rs 25 lakh for the services segment. For the 2nd PMEGP loans, the maximum subsidy has been capped at Rs.15 lakh (Rs.20 lakh for Northeast Region (NER) and Hill States) for manufacturing units and at Rs.3.75 lakh (Rs.5 lakh for Northeast Region and Hill States) for service units.

In case of units where the total project cost exceeds Rs. 1 Crore for the manufacturing segment and Rs. 25 lakhs for the services segment, the balance credit can be availed from the banks without any Government subsidy.

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

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

Key Features of PMEGP Scheme

1. Repayment Tenure

The repayment tenure ranges from 3 years to 7 years after an initial moratorium as may be prescribed by the concerned financing bank or financial institution.

2. Project Cost

For setting up new enterprises:

The maximum cost of the project for new enterprises allowed for Margin Money subsidy is as follows:

For existing PMEGP/REGP/MUDRA units (2nd Loan for upgradation):

The maximum cost of the project for upgradation allowed for margin money subsidy is as follows-

The capital expenditure, including the cost of construction, should account for up to 60% of the total project cost, while the working capital cost should be up to 40%. However, the financing bank can determine the eligibility criteria for business loan sanction based on the nature of the project at the time of business loan approval.

The banks will cover the balance amount (excluding the beneficiary's contribution) of the total project cost. Also, if the total project cost exceeds the maximum ceiling limit, banks may provide the balance amount without government subsidy for both the existing and new units.

3. Collateral

The project cost of up to Rs 10 lakhs is free from collateral security under PMEGP loans.

Margin Money Subsidy

Margin money (subsidy) will be a 'one-time assistance'. The subsidy is not available for any enhancement of credit limit or modernization or expansion of the project, except in case of units selected for upgradation through 2nd loan under this Scheme. The PMEGP units are required to be registered under the Udyam Portal before the adjustment of Margin money in the loan account.

Projects financed jointly, i.e. from two different banks or financial institutions, are not eligible for margin money assistance.

Rate of Subsidy for existing PMEGP/REGP/MUDRA units (2nd Loan for upgradation)

EDP Training

Entrepreneurship Development Programme (EDP) training is mandatory for claiming margin money through PMEGP e-portal. For projects costing above Rs 5 lakhs, the beneficiary has to undergo EDP training for 10 working days and 5 working days for projects costing up to Rs 5 lakhs. The training is not compulsory for projects costing up to Rs 2 lakhs.

The training will involve interacting with successful rural entrepreneurs, banks, and field visits. KVIC has developed an online module to offer free 2-day EDP training to prospective entrepreneurs.

The applicants, who have already undergone training of a minimum of 60 hours (for online mode) and a minimum of 10 days (for offline mode) under EDP or Entrepreneurship cum Skill Development Programme (ESDP) or Skill Development Programme (SDP) or Vocational Training (VT) are not required to undergo EDP training again.

PMEGP Loan Eligibility Criteria

To apply for a PMEGP loan, applicants are generally required to meet the following conditions:

1. For PMEGP New Enterprises (Units)

Stated below are the eligibility criteria for setting up new enterprises under the PMEGP scheme.

• Minimum Age: Above 18 years of age
• Income Criteria: No income criteria are required for setting up projects under PMEGP
• The applicant or beneficiary (individual entrepreneurs) must have at least VIII standard educational qualification to set up a project costing over Rs 10 lakh in the manufacturing sector and over Rs 5 lakh in the service or business sector.
• PMEGP loan is offered to new viable microenterprises, including village industries projects except activities prohibited by local Government/Authorities due to environmental or socio-economic factors and those mentioned in the negative list of the guidelines.
• Existing Units and the units that have already availed any Government Subsidy (such as PMRY, REGP, CMEGP, PMEGP or any other scheme of the Government of India or State Government) are not eligible for the PMEGP scheme
• Projects without Capital Expenditure (Term Loan) are not eligible for this scheme
• The cost of land is not allowed to be included in the project cost. The cost of a pre-built shed and a long-term lease or rental for a workshed/workshop can be included in the project cost, but only for a maximum period of 3 years.
• All Implementing Agencies (KVIB, DIC, KVIC and Coir Board) can process applications in both rural and urban areas.
• Applicant should have valid Aadhaar Number
• Applicant is required to give his/her consent to authenticate demographic details such as Name, Gender, Aadhaar number, Mobile number and Date of Birth from UIDAI server.
• Only one person from one family is eligible for availing PMEGP loan for setting up projects under the scheme. The ‘family’ includes self and spouse.

For up-gradation of existing PMEGP/REGP/MUDRA units:

Stated below are the eligibility criteria for availing second PMEGP loan for the upgradation of existing units financed under PMEGP/MUDRA Scheme:

• Margin Money or subsidy claimed has to be successfully adjusted on the completion of the lock-in period of 3 years.
• The first loan under the PMEGP or REGP or MUDRA scheme has to be fully repaid in the stipulated time
• The beneficiary has the option to apply for a second PMEGP loan from the same financing bank that provided the first loan, or from any other bank willing to extend a credit facility.
• The unit has been profitable for the last 3 years and has the potential for further growth in turnover and profit through modernizing or upgrading the technology.
• Udyog Aadhaar Memorandum (UAM) registration is mandatory
• The second loan should provide additional employment generation

Activities not allowed under PMEGP Scheme

Listed below are the activities not eligible for PMEGP loan under the scheme:

• Any industry/business connected with meat (slaughtered),i.e. processing, canning and/or serving items made of it as food, production/manufacturing or sale of intoxicant items like Cigar/Beedi/Pan/Cigarette etc., any Hotel or Dhaba or sales outlet serving liquor, preparation or producing tobacco as raw materials, tapping of toddy for sale. However, serving or selling non-vegetarian food at Hotels or Dhabas will be allowed under the scheme.
• Activities prohibited by Local Government/Authorities due to environmental or socioeconomic factors.
• Manufacturing of polythene carry bags of less than 75 microns thickness and manufacture of carry bags or containers made of recycled plastic for carrying, dispensing storing or packaging of food stuff and any other item which causes environmental problems. The thickness of polythene carry bags shall be governed by the Ministry of Environment, Forest and Climate Change notification for plastic waste management rules and amendments from time to time.
• Any industry or business connected with the cultivation of crops or plantations such as tea, coffee, rubber etc. horticulture, floriculture, animal husbandry, sericulture (cocoon rearing) will not be allowed. However, value addition under these categories will be allowed for availing loan under the scheme. Off Farm or Farm Linked activities in connection with horticulture, sericulture, floriculture etc. will also be allowed.
• Listed below are the industries or businesses connected with animal husbandry allowed under the PMEGP scheme:
• Dairy - Milk and other dairy products through cows (primarily), sheep, goats, horses, camels, buffaloes and donkeys.
• Poultry - Poultry, kept for their eggs and for their meat, include turkeys, geese, chickens and ducks.
• Aquaculture - it is the farming of aquatic organisms including molluscs, crustaceans, fish and aquatic plants.
• Insects - including Bees, Sericulture, etc.