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.

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.

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. It is a one-time assistance — not available for credit-limit enhancement or project expansion/modernisation.

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).