Home | Blog | PMEGP – Guide (PMEGP Loan, Online Application)

PMEGP – Guide (PMEGP Loan, Online Application)

8 min read

pmegp loan

Overview:

PMEGP full form is Prime Ministers Employment Generation Programme which commenced on 31st  March 2008 by merging the earlier PMRY (Prime Minister Rozgar Yojana) and REGP (Rural Employment Generation Programme). It was a measure to integrate the two programmes with similar goals to concentrate on a unified effort to encourage the youth to create micro-enterprises in the rural and urban sectors of the country.  The Ministry of MSME (Micro Small and Medium Enterprises), Government of India is vested in the administrative control of the programme. The implementation of the PMEGP has been entrusted to the KVIC (Khadi and Village Industries Commission) at the national level and their directorates and boards at the state and DIC at the district level. It is primarily a credit linked subsidy provided to boost employment among the youth of the country by indulging in the business of manufacture and services by setting up new ventures. In order to comprehend the nuances of the scheme better, it is imperative to delve into the PMEGP scheme details in greater depth.

Features of PMEGP Loan Scheme:

The basis of the PMEGP scheme is the provision of subsidies for starting a micro-enterprise to make the project viable through the extension of credit in the form of PMEGP loan. The various features marking this vital initiative are:

  • Objectives: The primary objectives PMEGP KVIC to combine its four-fold encompassing the following.
    • To open up employment opportunities in the rural as well as urban areas by helping establish new micro-enterprise projects.
    • By integrating the widely spread artisans and unemployed youth in the country into a combined effort towards self- employment avenues.
    • Prevent the migration of the rural youth to urban centers in search of sustainable employment by boosting the potential of traditional vocation all through the year.
    • To augment the income of traditional artisans in the rural area by providing means of self-employment.
  • Quantum of Loan: Being under the overall formula applicable to  MSME, the PMEGP guidelines specify amount restrictions in the following form:
    • Manufacturer: Rs.25 lakhs maximum.
    • Services: Rs.10 lakhs maximum.
  • Self-Investment: It is determined depending on the location of the enterprise.
    • Plains: Maximum Rs.1 lakh.
    • Hills: Maximum Rs.1.5 lakhs.
  • PMEGP loan details: The fundamental parameter can be broken up as following for a comprehensive picture of the subsidy granted for PMEGP application:
    • The specified category includes people belonging SC/ST/OBC, women, physically challenged, Ex-Defence Service Personnel, North East, and Border Areas, among others.
    • The funding gap is provided as the Term Loan by the banks.

Pattern of subsidy to determine proportion of funding of the project cost

Category

Self-share of project cost

Subsidy provided by the Government

Urban

Rural

General

10%

15%

25%

Special

5%

25%

35%

  • PMEGP Loan Tenure: The Term loan has a repayment period of between 3 and 7 years. The moratorium period uniformly extended by the banks is 6 months.
  • Allocation Ratio: The proportionate allocation of the PMEGP loan bears the following pattern:
    • The subsidy is treated as the margin money and is proportional to the capital expenditure of the borrower. The surplus if any, is returned to KVIC.

Category of borrower

Ratio of Project Cost funded by bank

Margin Money (Subsidy)

Urban

Rural

General

90%

15%

25%

Special

95%

25%

35%

PMEGP Loan Interest Rate:

The interest rate applicable as per bank’s norm for MSME enterprises is in the range of 11% and 12% pa. However, under the provisions of ISEC (Interest Subsidy Eligibility Certification) Scheme, the applicable interest rate is a concessional 4% for a mix of Working and Fixed Capital expenses. The differential with the regular interest rate is made good by the KVIC under the “Grants” head of the budget. This facility is limited to members involved in the production of Khadi and Polyvastra only.

Eligibility Criteria for PMEGP Loan:

The loan facility is extended to individuals and organizations meeting the specific norms for eligibility for PMEGP application:

  • The age of the Individual should be over 18 years.
  • Individuals should have cleared the class VIII examination of the school.
  • For individuals, the size of the project must meet the following criteria:
    • Manufacturer: Over Rs.10 lakhs.
    • Service: Over Rs.5 lakhs.
  • Self-help groups are eligible if they have not availed of any other scheme benefit.
  • Registered Societies.
  • Charitable Trusts; and
  • Co-operative societies involved in the business of production.
  • No income ceiling is applicable for availing the loan.
  • The loan facility applies only to new ventures and those who have not enjoyed and benefited from similar schemes in the past.
  • List of eligible activities: The loan is restricted to only activities specifically approved eliminating those that fall in the negative list.
    • Approved List:
      • Food Processing provided it is agro-based.
      • Hand-made paper and fibre production.
      • Products sourced from forests.
      • Products sourced from minerals.
      • Products sourced from chemicals and polymers.
      • Bio technology and Rural engineering.
      • Service and textile products.
    • Negative List:
      • Meat and slaughterhouse.
      • Restaurants and Dhabas offering liquor.
      • Tobacco and similar products.
      • Sales and tapping of toddy.
      • Activities involving cash crops.
      • Horticulture, floriculture etc.
      • The list is only suggestive and not inclusive.

Documents Required for PMEGP Online Application:

The PMEGP loan sanction process can be initiated by accessing the PMEGP portal only, which is a dedicated digital interface provided by KVIC. The list of documents required is elaborate matching the requirements of the banks for a seamless process.

  • All KYC documents of the borrower for the information input into the PMEGP e portal that includes the Aadhaar, PAN, and EPIC etc.
  • Caste or community certificate to fit the properly defined category.
  • A claim to the appropriate subsidy.
  • Project cost representing the break-up of one cycle consisting of capital Expenditure and Working capital component.
  • A certificate from the controlling office of the bank specifying the absence of the need for working capital.

Procedure for PMEGP application:

It is imperative that the borrower invokes the portal for PMEGP online application procedure – https://www.kviconline.gov.in/pmegpeportal/pmegphome/index.jsp . The inputs required to complete the process may be split into three phases. In the first phase, the personal details are input. The second has the facility to enter all the information that pertains to the PMEGP status including PMEGP Loan Limit desired. The account details of the bank are also mandatorily sought. Once this process is over, the application is to be saved for invoking the third step – the submission of documents in the digitized format. Only on completion of all the three phases, the application can be finally submitted for evaluation. An application acknowledgment ID and password is messaged to the registered mail ID for future use.

Why is Lendingkart important?

We at Lendingkart do not accept deposits seeking NBFC specializing in the business of lending. Our operations are spread pan India with the effective use of digital interface for the entire cycle of loan application, evaluation, sanction and disbursal in a matter of 72 hours, which is a benchmark in the industry for others to emulate. We offer a range of credit products to cater to different target categories that make Lendingkart a choice destination for the prospective borrower who is interested in hassle-free, seamless experience. The redeeming feature of our loans is that they are free of any collateral requiring minimal documentation. For more information, contact info@lendingkart.com freely or visit – lendingkart.com.

Bottom Line:

PMEGP is the flagship initiative of the Government of India, has a broad canvas to work upon towards generation of employment opportunities, primarily impacting the traditional modes of sustainable living. The successful implementation of the scheme envisages the involvement of multiple agencies right to the grassroots of governance, including the Panchayats for identifying the prospective beneficiaries. The success of the PMEGP scheme will ensure a large section of unemployed youth to not only indulge in gainful employment but also ensure demographic stability of the rural and urban sectors in the country.

PMEGP FAQs:

1. Is there any lock-in period prescribed for the margin money?

Yes, the margin money which is also the subsidy component of the Project Cost is locked in for 3 years. It is reserved in a separate SB account subsequently offset against the overall PMEGP loan limit, subject to the utilization of funds as per bank’s requirements.

2. How is the expenditure on rent/lease and land for the unit treated as a component of the Project Cost?

The cost of rent or lease, if it is not greater and 3 Years in age, is treated the component of the Project Cost. However, the cost of land does not qualify as a legitimate component of project cost.

3. How has the scheme fared in the last few years?

The following grid is indicative of the statistical proportions of the achievement of the PMEGP as a whole derived from the PMEGP e Portal.

Financial year

Application Received (Number)

Forwarded to banks (Number)

Sanctioned by banks (Number)

2016-17

405055

149929

37503

2017-18

442007

271782

68663

2018-19

389589

253002

60663

2019-20

102646

26450

5426

4. What are the security provisions in loans granted under the PMEGP scheme?

As per the RBI guidelines defined for PMEGP loans, the need for collateral security is waived for units with project cost up to Rs.10 lakhs. On the other hand, there is a provision for CGTSME providing a guarantee which is equivalent to collateral for units with project cost in the range of Rs.5 lakhs and Rs.25 lakhs under the scheme.

5. Under the PMEGP loan scheme, is there a provision for borrowers proposing multiple units?

The provision of the scheme permits only one unit per borrower.