PMEGP Scheme (Prime Minister’s Employment Generation Programme)

PMEGP was approved by the Government of India by merging two schemes that operated till 31.03.2008 — Prime Minister's Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP) — into a single credit-linked subsidy programme for generating employment through micro enterprises in both rural and urban areas. It is a Central Sector Scheme administered by the Ministry of MSME and implemented by the Khadi and Village Industries Commission (KVIC) as the single nodal agency at the national level, working through State KVIC Directorates, State KVIBs, District Industries Centres (DICs), and Banks. The specific objectives are to:

• •Generate employment opportunities in rural and urban areas through setting up new self-employment ventures, projects, and micro enterprises.
• •Bring together widely dispersed traditional artisans and rural/urban unemployed youth, giving them self-employment opportunities at their own place as far as possible.
• •Provide continuous and sustainable employment to a large segment of traditional and prospective artisans and unemployed youth, helping arrest migration of rural youth to urban areas.
• •Increase the wage-earning capacity of artisans, contributing to growth in the rural and urban employment rate.

Eligible Applicants

• •Any individual, above 18 years of age
• •Self Help Groups (including BPL SHGs, provided they haven't availed benefits under any other scheme)
• •Institutions registered under the Societies Registration Act, 1860
• •Production Co-operative Societies
• •Charitable Trusts

Core Conditions

• •There is no income ceiling for assistance under PMEGP.
• •For projects costing above ₹10 lakh (manufacturing) or above ₹5 lakh (business/service), the beneficiary must hold at least an VIII standard pass educational qualification.
• •Assistance is available only for new projects sanctioned specifically under PMEGP — existing units, and units that have already availed government subsidy under any other Central/State scheme, are not eligible.
• •Only one person per family (self and spouse) is eligible for financial assistance under the scheme.
• •Project cost must include Capital Expenditure and one cycle of Working Capital — projects without Capital Expenditure are not eligible.
• •Cost of land is excluded from project cost; cost of ready-built, long-lease, or rental workshed/workshop can be included, capped at a maximum of 3 years' cost.
• •Working capital must not exceed 40% of project cost — at least 60% has to be capital expenditure. A project that is mostly working capital is not fundable under PMEGP however viable it looks.
• •Rural means an area under a Panchayat, whatever its population. The higher rural rate needs a certificate from the Gram Panchayat or Sarpanch on letterhead, and it is the address of the unit that decides it — not where the applicant lives.
• •Retail and trading activities are not eligible except in notified areas (the North Eastern Region, hill states and island Union Territories).
• •The applicant's credit history must clear the financing bank's norms. A CIBIL problem does not fail the KVIC score card, but it fails the bank — and without a bank sanction there is no subsidy.

A. Margin Money (Subsidy) Rates

The balance amount of total project cost is provided by Banks as a term loan.

B. Project Cost Ceiling

C. Bank Finance

• •Bank sanctions 90% of project cost for General Category beneficiaries and 95% for Special Category beneficiaries.
• •Bank credit will typically range between 60–75% of total project cost, after deducting the 15–35% margin money (subsidy) and the owner's contribution (10% general / 5% special).
• •Financing may be a Term Loan (Capital Expenditure), Cash Credit (Working Capital), or a Composite Loan covering both.
• •Working Capital must be utilised so that it reaches 100% of the Cash Credit limit at some point within the 3-year lock-in of margin money, with not less than 75% utilisation — shortfalls trigger proportionate recovery of subsidy.

D. Interest & Repayment

Normal rate of interest is charged by the financing bank. Repayment is scheduled over 3 to 7 years after an initial moratorium prescribed by the bank. No collateral security is insisted upon for projects up to ₹5 lakh cleared by the District Task Force, per RBI guidelines, and CGTMSE cover is available above that — so a PMEGP borrower is not normally asked for security. There is no interest subsidy under PMEGP; the subsidy is the margin money alone. Some state schemes, such as Rajasthan's VYUPY, add an interest subvention on top.

E. Margin Money Retention & Release

Margin money (subsidy) released is kept in a Term Deposit Receipt (TDR) for 3 years in the beneficiary's name — no interest is paid on the TDR, and none is charged on the corresponding loan amount. After 3 years from first disbursement, the subsidy is credited to the borrower's loan account. The margin money on a given loan is one-time — it cannot be claimed again to enhance that credit limit or to expand the same project. A separate second loan for upgradation is available once the first is closed; see below.

1. 1Go to kviconline.gov.in → PMEGP e-portal → 'Online Application Form for Individual' (or 'for Non-Individual' for SHGs, societies, trusts and co-operatives); enter Aadhaar and name and verify with the OTP.
2. 2Fill the form: sponsoring agency (KVIC, KVIB, DIC or the Coir Board for coir units — pick the office that is nearest and responsive; DIC and KVIB both process urban and rural files), district, activity type, industry and product, project cost, first, second and third bank preference with branch, education, category, and whether EDP training is already done.
3. 3Upload the documents listed below, then submit to receive the application ID and password. Save both — they are how you track the file.
4. 4Agency scrutiny: the office scores the file against the KVIC score card (100 points across experience, education, project viability, category and area) and forwards it to your preferred bank. Status is visible on the portal throughout.
5. 5Bank appraisal and sanction: the branch appraises viability and margin, interviews you, and sanctions the term loan and cash credit. The bank must sanction after the portal application reaches it — a loan sanctioned earlier cannot be brought under PMEGP afterwards.
6. 6EDP training: complete the Entrepreneurship Development Programme on the notified online platform and upload the certificate. It runs 10 working days for projects above ₹5 lakh and 5 working days at or below it. Disbursement and the margin-money claim both wait for the certificate.
7. 7Disbursement and margin money: after the first disbursement the bank uploads the margin-money claim, KVIC releases the subsidy to the bank, and the bank holds it as a term deposit in your name for three years before adjusting it against the loan — subject to physical verification that the unit is actually working.

1. 1Application/sponsorship: The applicant submits the project proposal directly to a Bank/Financial Institution, or through KVIC/KVIB/DIC/Panchayat Karyalayas. Sponsorship by an agency is not mandatory.
2. 2Task Force scrutiny: A District Task Force — chaired by the District Magistrate/Deputy Commissioner/Collector, with representatives from the Lead Bank, KVIC/KVIB, DIC, Panchayats, and others — scrutinises applications based on experience, technical qualification, skill, and project viability, and conducts interviews.
3. 3Project formulation guidance: Selected candidates receive project formulation guidance and orientation from KVIC/KVIB/DIC before submission to the concerned Bank.
4. 4Bank appraisal & sanction: The Bank appraises the project technically and economically (industry type, per-capita investment, own contribution, rural/urban status, negative list) and takes its own credit decision based on project viability.
5. 5Mandatory EDP training: Before the first loan instalment is released, the beneficiary must complete Entrepreneurship Development Programme (EDP) training of at least 2 weeks (waived if already completed at a recognised institution). Projects are declared ineligible for subsidy if EDP is not completed.
6. 6Owner's contribution & first disbursement: After EDP completion, the beneficiary deposits the owner's contribution with the Bank, which then releases the first instalment of Bank finance.
7. 7Margin Money claim: The financing Bank submits the Margin Money (subsidy) claim to the designated Nodal Branch, where KVIC has placed the subsidy funds in advance. KVIC/State DIC remains the final authority to accept or reject the claim.
8. 8TDR lock-in & sign-board display: The released margin money is held in a 3-year Term Deposit Receipt in the beneficiary's name. Every beneficiary must display a prescribed sign-board at the project site naming the unit, financing Bank, and the PMEGP/KVIC/Ministry of MSME branding.
9. 9Physical verification & monitoring: KVIC conducts 100% physical verification of established units, and beneficiaries submit quarterly reports on production, sales, employment, and wages to the State/Regional Director of KVIC/KVIB/DIC.

• •Any industry/business connected with slaughtered meat processing/canning/serving; production or sale of intoxicants such as Beedi/Pan/Cigar/Cigarette; hotels/dhabas/outlets serving liquor; tobacco raw-material production; toddy tapping for sale.
• •Cultivation of crops/plantations such as tea, coffee, rubber; sericulture (cocoon rearing); horticulture, floriculture; animal husbandry activities like pisciculture, piggery, poultry; harvester machines.
• •Manufacturing of polythene carry bags below 20 microns thickness, and carry bags/containers made of recycled plastic for storing, carrying, or packaging food or other items causing environmental problems.
• •Processing of Pashmina wool and similar products (hand-spinning/hand-weaving) that take undue advantage of the Khadi Programme's certification rules and sales rebate.
• •Rural transport (except Auto Rickshaw in Andaman & Nicobar Islands, House Boat/Shikara/Tourist Boats in J&K, and Cycle Rickshaw).

• •Lock-in: the margin money stays as a term deposit for three years. If the unit closes in that window the bank recovers it, and the cash-credit limit has to be genuinely used — the guidelines expect utilisation to touch 100% at some point and not less than 75% overall, with proportionate recovery if it falls short.
• •Records to keep for the physical verification: the sanction letter, the disbursement schedule, machinery invoices, Udyam registration, GST registration once turnover crosses the threshold (it is not needed at application), and the EDP certificate.
• •Second loan for upgradation: a unit that has repaid its first PMEGP, REGP or MUDRA loan on schedule, whose margin money has been adjusted after the 3-year lock-in, that has been profitable for three consecutive years and holds Udyam registration, can take a second loan for upgradation — project cost up to ₹1 crore for manufacturing and ₹25 lakh for service, at 15% margin money (20% in the North Eastern Region and hill states), and it must create additional employment.
• •This is a different thing from enhancing the first loan, which the scheme does not allow. The first credit limit is closed; the second is a fresh appraisal on a fresh project.