The Indian government is offering loans under the PMEGP loan scheme to small and medium-scale industries. Under this scheme, there is a subsidy benefit of up to 35% given to applicants.
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Government Loan Schemes Under PMEGP Loan Scheme
There are many government schemes where you can avail loans for your business. One of the most popular loan schemes is CGTMSE. It is a government scheme in which loans of up to 5 crores are offered to small and medium-scale industries without collateral. Besides CGTMSE, there is another popular government scheme where loans of up to 50 lakhs are given with a 35 percent subsidy. If you are interested in knowing the details of this government scheme, then scroll down and read the complete article.
What is PMEGP Loan Scheme?
PMEGP stands for Prime Minister’s Employment Generation Programme. It is a credit-linked subsidy scheme, which is managed by MSME. The main aim of PMEGP scheme is to generate employment opportunities through micro-enterprises, especially in the non-farm sector for both rural and urban areas. PMEGP has been formed by merging two separate government schemes namely PMRY (Prime Minister’s Rojgar Yojana) and REGP (Rural Employment Generation Programme). These two schemes were functional till March 31, 2008.
PMEGP Loan Scheme: Category and Subsidy
The PMEGP loan scheme subsidy depends on various factors, including the category and area where the industries are to be established. The following table briefly describes what percentage of subsidy would be given under different criteria.
| Category | Urban | Rural |
| General | 15% | 25% |
| Special (SC, ST, OBC, Minorities, Women, differentially abled, NER, Ex-servicemen) | 25% | 35% |
If you belong to a general category and want to start a project in an urban area, then the subsidy percentage would be 15%. For instance, if your project cost is, say, 20 lakhs, then you can avail yourself of a subsidy of 3 lakh. On the other hand, if you start a project in a rural area, then you can avail yourself of a subsidy of 25%. Likewise, if you belong to a special category and start a project in an urban area, then you can avail yourself of a 25% subsidy. And if the project is started in a rural area, then you can avail yourself of a 35% subsidy on the loan amount.
PMEGP Loan Scheme (7 Easy Steps)
If you follow the 7 steps carefully for a PMEGP loan, then the chance of approval will be maximum. So, read the 7 steps carefully to maximize your chance of getting a PMEGP loan.
Eligibility Criteria for PMEGP Loan Scheme
- You should be 18 or above 18 years old
- No income ceiling: whether you are earning 5 lakhs per annum or 50 lakhs per annum, you are eligible to apply for this loan
- Proprietorship firm only: If your company is LLP or private limited, then you are not eligible for this loan. Only proprietorship firm owner can avail this kind of loan.
- Education: above 8th standard pass
- Only for new project
- Not for other scheme beneficiaries: if you have already availed the benefits of other government schemes, then you are not eligible to apply for this loan.
Approach the Bank before Applying for PMEGP Loan Scheme
The first thing that you need to do is approach the bank. Inform the bank that you want to apply for a loan under the PMEGP loan scheme. Discuss your project briefly with the bank manager to build credibility. The RBI has instructed government and private banks to give special priority to the PMEGP project. This hastens the process of loan approval.
Visit the PMEGP Portal to Avail PMEGP Loan Scheme
Visit the PMEGP portal online. Click on the tab: PMEGP online application for a new unit. Fill out the form online and submit it. Once the form is submitted, it is forwarded to implementing agencies such as KVIC (Khadi and Village Industries Commission), KVIB (State Khadi and Village Industries Boards), and DIC (District Industries Centres). After that, a nodal officer will call and discuss your application with you within 5 working days. During the discussion, the nodal officer will ask about your project and how much loan is required. Additionally, if you have made any mistakes while filling out the form, the nodal officer will correct them. Finally, the nodal officer will forward the corrected application to the bank.
When you fill out the application form on the PMEGP portal, you will be asked to select the bank and the bank branch. You should select the bank branch where you have already met the bank manager and discussed the project. This will enhance the probability of a quick loan sanction.
Sanction of PMEGP Loan Scheme
Loan sanction will be done by the bank manager. Since you have already convinced the manager about your project, the loan will be sanctioned. A copy of the sanction letter will be sent to the IA (implementing agency) and the applicant. After that, the sanction letter will be automatically forwarded to the online EDP (Entrepreneurship Development Programme) portal. This EDP is required and can be done offline or online. For instance, if you have a 5-lakh project, then you will need to attend 10 days of offline training or 60 hours of online training. After completion of EDP training, a certificate is issued in the name of the applicant.
PMEGP Loan Disbursement
After completion of all the above steps, the loan amount is finally disbursed. This is a very important step, as the loan amount is finally given to the applicant to start the project.
PMEGP Subsidy Release
Once the loan is disbursed, the bank informs the nodal agency (KVIC or KVIB or DIC), which monitors all government schemes. The bank provides all the applicant’s information on the KVIC portal after disbursing the loan amount. Subsequently, the subsidy is transferred to the bank by the KVIC. The subsidy amount remains locked in for 3 years, similar to a fixed deposit. However, it is a special type of fixed deposit where the bank will not pay any interest on the subsidy amount for three years. Moreover, the interest you will pay on the loan amount will be calculated on the loan amount minus the subsidy amount. For instance, if your PMEGP loan amount is 50 lakh and the subsidy amount is 10 lakhs, then you will only pay interest on 40 lakhs.
PMEGP Subsidy Disbursement
After the 3-year lock-in period, the subsidy amount is disbursed by the bank. However, before releasing the subsidy amount, there will be a physical verification of your industry after one or two years of establishment. Government-sponsored agencies are responsible for the physical verification of the business establishment. After the verification, the implementing agency will send a subsidy adjustment letter to the bank. This means the implementing agency will order the bank to release the subsidy amount and credit it to the applicant’s bank account. Before releasing the subsidy amount, the bank will check two things: whether your business has completed 3 years or not, and the adjustment letter.
FAQs (Frequently Asked Questions)
Q. Where the applicant has to submit his/her application for PMEGP loan?
A. The applicant can submit his / her application on the KVIC website.
Q. What is the age limit for the PMEGP loan?
A. The applicant must be 18 years or above.
Q. Whether EDP training is compulsory?
A. Yes, if the project cost is up to 5 lakhs and above.
Q. Whether collateral security is mandatory for PMEGP loan?
A. Project cost of up to 10 lakhs are free from collateral security. The CGTMSE provides collateral on behalf of the applicant for the project beyond 5 lakhs and up to 25 lakhs.