Prime Minister's Employment Generation Program (PMEGP): Loan Details, Eligibility & How to Apply

In August 2008, the Government of India sanctioned the creation of a novel credit-linked subsidy program known as the PMEGP Scheme. The PMEGP's full form is the Prime Minister's Employment Generation Programme. This scheme is implemented by the Khadi and Village Industries Commission (KVIC) to provide financial assistance to set up new projects, and to generate employment and increase the wage-earning capacity of workers. Under this scheme, the Government provides a subsidy of 15-35% of the project as described in detail below. It empowers individuals as well as promotes the growth of the MSME sector. The article below talks about the eligibility, guidelines, and loan limits of the PMEGP Scheme.

Objectives Of The PMEGP Loan Scheme

The four core objectives for which the PMEGP Scheme was initiated are as follows:

1. To generate employment opportunities by establishing micro-enterprises in the non-farm sector, catering to both rural and urban areas.
2. To bring together widely dispersed traditional artisans or rural and urban unemployed youth and give them self-employment opportunities to the extent possible, at their place. 
3. To provide continuous and sustainable employment to a large segment of traditional and prospective artisans and rural and urban unemployed youth in the country, so as to help arrest the migration of rural youth to urban areas. 
4. To increase the wage-earning capacity of workers and artisans and contribute to an increase in the growth rate of rural and urban employment.

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Eligibility Criteria For The PMEGP Scheme

The eligibility criteria for the PMEGP Scheme are as follows:

PMEGP guidelines for new enterprises (Units):

1. Your age must be above 18 years.
2. For setting up of projects costing above INR 10 lakhs in the Manufacturing sector and above INR 5 lakhs in the Business /Service sector, the beneficiaries should possess at least a standard VIII-pass educational qualification. 
3. Assistance under the scheme is available only for new projects sanctioned specifically under the PMEGP. 
4. Existing Units (under PMRY, REGP, or any other scheme of the Government of India or State Government) and the units that have already availed of Government Subsidy under any other scheme of the Government of India or State Government are not eligible. 

Other eligibility conditions for PMEGP (New units):

1. Projects without capital expenditures are not eligible for financing under the Scheme. 
2. The cost of the land should not be included in the project cost. 
3. PMEGP is applicable to all new viable microenterprises, including village industries projects.

Trading activities:

1. Retail outlets/Business - selling khadi products, village industry products procured from khadi and Village Industry Institutions certified by KVIC, and products manufactured by PMEGP units and SFURTI clusters only may be permitted under PMEGP across the country. 
2. Retail outlets backed by Manufacturing (including processing) / Service facilities may be permitted across the country. 
3. The maximum cost of the project for business / trading activities as above [(a) and (b)] may be INR 20 lakh (at par with the maximum project cost for the Service sector).

PMEGP Loan Details And Guidelines:

The PMEGP scheme provides financial assistance in the form of a subsidy and a loan to beneficiaries to set up their enterprises. The maximum cost of the project under the scheme is divided into two parts: Project Cost and Beneficiary Contribution.

1. Project Cost:

The project cost includes both capital expenditure (building, machinery, equipment, etc.) and working capital for the proposed business. The project cost limit depends on the sector and the location of the business:

• Manufacturing Units: The maximum project cost for manufacturing units is INR 50 lakhs.
• Service Units: The maximum project cost for service units is INR 20 lakhs.

2. Finance:

The lender will sanction 90% of the project cost in the case of General Category beneficiaries and 95% in the case of Special Category beneficiaries, and disburse the full amount suitably for the setting up of the project. The lender will finance Capital expenditures in the form of term loans and working capital in the form of cash credit.

3. Beneficiary Contribution:

The beneficiaries are required to contribute a certain percentage of the project cost, which varies based on the category of the beneficiary and the location of the business. General category beneficiaries contribute 10% of the project cost. Special category beneficiaries contribute 5% of the project cost.

4. Subsidy:

The subsidy component of the PMEGP loan yojana is as follows:

• For General Category: The subsidy component will be 15% of the project cost in Urban areas and 25% of the project cost in rural areas.
• For Special Category: The subsidy component will be 25% of the project cost in Urban areas and 35% of the project cost in rural areas.
• Summarizing the above, the beneficiary would need to contribute 5-10% of the total project cost, and the remaining would be financed by the lender. Of the remaining 90-95%, the PMEGP loan scheme will cover 15-35% of the project cost, leaving 60-75% for the lenders to cover.

5. Interest Rate And Tenure:

A normal rate of interest shall be charged. The repayment schedule may range between 3 to 7 years after an initial moratorium, as may be prescribed by the concerned financial institution.

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How To Apply For A PMEGP loan?

Below are the steps to apply for PMEGP online for an individual:

• Step 1: Visit the official website of PMEGP (Khadi and Village Industries Commission website).
• Step 2: Follow the guidelines for filling out the online PMEGP application and fill in all the required details such as Aadhaar Number, Name, State, Financing Institution, etc.
• Step 3: After filling in all the required details, click on ‘Save Applicant Data’.
• Step 4: Now, you need to upload all the documents for the final submission of the application form.
• Step 5: Once the application is complete and submitted, the applicant’s ID number and password will be sent to his/her registered mobile number.

To track the status of the application, log in to the PMEGP e-tracking system. Enter ‘Applicant Id’ and click on ‘View Status’ to check the status.

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Conclusion

The PMEGP scheme is a significant step towards fostering entrepreneurship and addressing unemployment in India. By offering financial assistance and support to aspiring entrepreneurs, the scheme not only empowers individuals but also contributes to the growth of the micro, small, and medium enterprise sector. As the scheme continues to evolve, it holds the potential to play a crucial role in India's journey toward economic self-reliance and prosperity.

Consider SMFG India Credit as your financial partner in availing the PMEGP loan. We offer 100% paperless application process for business loans ranging from INR 50,000 to INR 1,00,00,000*, ensuring that you have access to the funds you need. With flexible tenures starting from 12 months and extension up to 60 months, we offer convenient repayment options that suit your preferences.