PMEGP Scheme: Eligibility, Subsidy, and How to Apply Online

The PMEGP scheme is a credit-linked subsidy programme run by the Ministry of Micro, Small and Medium Enterprises and implemented nationally by the Khadi and Village Industries Commission (KVIC) that helps you set up a new micro-enterprise by covering 15% to 35% of the project cost as government margin money, with you contributing 5% to 10% from your own funds and a bank term loan filling the rest. Manufacturing projects are funded up to ₹50 lakh and service or business projects up to ₹20 lakh.1Khadi and Village Industries Commission. PMEGP Guidelines At the district level, applications are processed by KVIC, State Khadi and Village Industries Boards (KVIBs), or District Industries Centres (DICs), who then route approved files to a bank for credit appraisal.

Who Can Apply

You must be at least 18 years old. If your proposed manufacturing unit costs more than ₹10 lakh, or your service unit costs more than ₹5 lakh, you also need to have passed at least the eighth standard.2Khadi and Village Industries Commission. PMEGP Eligibility of Applicant Below those thresholds, there is no formal education requirement.

Besides individuals, self-help groups that have not already drawn a subsidy under another government scheme can apply, as can charitable trusts, societies registered under the Societies Registration Act 1860, and production-based cooperative societies.3Khadi and Village Industries Commission. Prime Minister’s Employment Generation Programme Only new enterprises qualify for first-time PMEGP assistance. If you already run a PMEGP, REGP, or MUDRA unit, your route is the second loan for upgradation covered later.

How Much You Can Get

Project cost caps include both capital expenditure and working capital. The ceiling is ₹50 lakh for a manufacturing unit and ₹20 lakh for a service or business unit.1Khadi and Village Industries Commission. PMEGP Guidelines

General Category

You put in 10% of the project cost yourself. The government subsidy is 15% in urban areas and 25% in rural areas. The bank loan covers the balance.

Special Category

If you belong to a Scheduled Caste, Scheduled Tribe, OBC or minority community, or are a woman, ex-serviceman, physically handicapped person, or transgender person, or are setting up in a North-Eastern state, hill area, or border area, you contribute only 5%. The subsidy becomes 25% in urban areas and 35% in rural areas. You will need a valid caste, community, or other proof certificate to claim the higher rate.1Khadi and Village Industries Commission. PMEGP Guidelines

A worked example: a woman setting up a rural manufacturing unit with a project cost of ₹20 lakh contributes ₹1 lakh (5%), receives a government subsidy of ₹7 lakh (35%), and takes a bank loan of ₹12 lakh (60%).

What Your Project Cost Can and Can’t Include

The cost of buying land cannot be included in the project cost. If you own or lease land, you can include lease or rental cost of a workshop up to a maximum of three years of rent, and the cost of a ready-built work shed is also includable.4Khadi and Village Industries Commission. Guidelines on Prime Minister’s Employment Generation Programme A business plan that assumes buying a plot will have that portion rejected by the bank.

Some activities are off-limits entirely. The negative list excludes any business connected with slaughtered meat, tobacco products such as beedis, pan, cigars, or cigarettes, and any establishment that serves liquor. Cultivation, sericulture, horticulture, and floriculture are excluded because they fall under separate schemes. Manufacturing polythene carry bags below 20 microns or containers from recycled plastic is barred. Pashmina wool processing by hand spinning and hand weaving that falls under the Khadi Certification Rules is excluded. Most passenger transport vehicles are also out, with specific exceptions for auto rickshaws, cycle rickshaws, and houseboats or tourist boats in the Andaman and Nicobar Islands and Jammu and Kashmir.5Khadi and Village Industries Commission. PMEGP Negative List

Collateral, Interest, and Repayment

Loans up to ₹10 lakh are collateral-free under RBI norms, so the bank cannot ask you to pledge property for smaller projects. For larger loans up to ₹2 crore, cover is available through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which means even a ₹50 lakh manufacturing project should not require personal collateral if the bank avails the guarantee.6Khadi and Village Industries Commission. Frequently Asked Questions Some branches still ask for it; if that happens, the grievance route below is your lever.

The scheme carries no special interest rate. Banks apply their normal commercial rates based on the prevailing base rate when they sanction the loan. One structural feature does soften the cost: for three years, the margin money subsidy sits in a Term Deposit Receipt in your name at the branch, and the bank cannot charge interest on the loan amount equivalent to that subsidy during that period. On a ₹20 lakh project with a ₹5 lakh subsidy, you pay interest only on ₹15 lakh for the first three years.1Khadi and Village Industries Commission. PMEGP Guidelines

Repayment runs three to seven years after an initial moratorium that the financing bank sets based on its assessment of your project.

The Three-Year Lock-In

The TDR holding the subsidy is also the scheme’s enforcement mechanism. If you shut down or default during those three years, the bank can recover the subsidy as though it were a regular overdue loan, and periodic inspections verify the unit is actually running. Getting the loan sanctioned is one hurdle; keeping the business operational and the EMIs current for three years is the real one.

Documents to Keep Ready

The application is submitted online, so you will need digital copies of:

  • Aadhaar number for identity verification by biometric or OTP. If you have enrolled but not yet received the card, the 28-digit Enrolment ID is accepted.7Khadi and Village Industries Commission. PMEGP Online Application Registration
  • PAN to verify tax status.8Khadi and Village Industries Commission. PMEGP Offline Application Form for Individual Applicant
  • Category certificate (SC/ST/OBC/minority/ex-serviceman or other relevant proof) if you are claiming the higher subsidy rate.
  • A Detailed Project Report (DPR) breaking down machinery, raw materials, working capital, and operational costs. This is the single most important document the bank will look at.
  • The EDP training certificate, if you already have it. If not, you can complete the training after sanction but before the margin money claim is filed.

EDP Training

Entrepreneurship Development Programme training is mandatory before the bank can claim the subsidy on your behalf. The duration depends on your project size:6Khadi and Village Industries Commission. Frequently Asked Questions

  • Projects above ₹5 lakh: 10 working days of training
  • Projects up to ₹5 lakh: 5 working days of training
  • Projects up to ₹2 lakh: no training required

Accredited institutions conduct these programmes, and your nodal agency coordinates the schedule. The training covers basics like bookkeeping, marketing, and regulatory compliance. The subsidy release is blocked until the certificate is uploaded to the portal, so this is not something to defer indefinitely.

Applying Online

Applications go through the KVIC e-portal at kviconline.gov.in. The flow:

  • Enter personal details: Aadhaar number, name exactly as it appears on Aadhaar, contact information, and PAN. Select your sponsoring agency, KVIC, KVIB, or DIC, based on where you want the application processed.7Khadi and Village Industries Commission. PMEGP Online Application Registration
  • Enter unit details: rural or urban location, manufacturing or service activity, and a description of the product or service.
  • Enter financial details: capital expenditure and working capital figures from your DPR. The portal calculates the total.
  • Select a bank by entering the IFSC code of your preferred branch. A second-preference branch is optional.
  • Save the form, upload all required documents, and submit.
  • On final submission, you receive an Applicant ID and password by SMS.

The nodal agency reviews, may conduct a site visit, and forwards recommended files to the bank, which runs its own credit appraisal before issuing a sanction letter. From submission to sanction can take several weeks to a few months depending on application volumes.

Second Loan for Upgradation

If you already run a unit set up under PMEGP, the older REGP, or MUDRA, you can apply for a second round to expand or upgrade. The ceilings are higher: up to ₹1 crore in manufacturing (maximum subsidy of ₹15 lakh, or ₹20 lakh in North-Eastern and hill states), and up to ₹25 lakh in service or trading (maximum subsidy of ₹3.75 lakh, or ₹5 lakh in North-Eastern and hill states).9Ministry of Micro, Small and Medium Enterprises. Guidelines for Second Financial Assistance Under PMEGP

The subsidy rate is a flat 15% of the project cost for everyone, with no general-versus-special distinction, and 20% in North-Eastern and hill states. Every applicant puts in 10% from their own funds. To qualify, you must have fully repaid the first loan on time, your unit must have been profitable for the last three years, and you must hold Udyog Aadhaar or Udyam registration. The second loan must lead to additional employment. You can go back to the same bank or approach a new one.

If Your Application Gets Stuck

The scheme has a formal grievance channel through the central public grievance portal at pgportal.gov.in. Select “Ministry of Micro Small and Medium Enterprises” as the department and mention “PMEGP Scheme Grievance to KVIC Nodal Agency” in the description.10Khadi and Village Industries Commission. PMEGP Public Grievance Redress e-System The most common complaints are bank branches sitting on files or asking for collateral on loans that should be collateral-free. A grievance reference number tends to move things along.