PMEGP Loan & Subsidy: Eligibility and How to Apply
The Prime Minister's Employment Generation Programme (PMEGP) is a credit-linked subsidy scheme administered by the Ministry of MSME through KVIC, KVIB, and District Industries Centres (DICs). It helps first-time entrepreneurs set up new micro-enterprises in manufacturing and service sectors by combining a bank loan with an upfront capital subsidy — making it one of the most accessible government schemes for self-employment in India.
What Is the PMEGP Loan?
A PMEGP loan finances up to 90–95% of the total project cost for eligible applicants. The beneficiary contributes only 5–10% as margin money (own contribution), while the government provides a subsidy ranging from 15% to 35% of the project cost directly to the lending bank. The remaining amount is a term loan repaid by the borrower over time.
Project Cost Limits for FY 2026-27
| Sector | Maximum Project Cost |
|---|---|
| Manufacturing | Up to ₹50 lakh |
| Service / Trading | Up to ₹20 lakh |
Note: These limits are as per the revised PMEGP guidelines. Verify the latest caps on the official KVIC portal before applying, as they are subject to revision.
PMEGP Subsidy Rates
| Beneficiary Category | Urban Area Subsidy | Rural Area Subsidy |
|---|---|---|
| General Category | 15% | 25% |
| Special Category (SC/ST/OBC/Minorities/Women/Ex-Servicemen/Differently Abled/NER/Hill & Border areas) | 25% | 35% |
The subsidy is kept in a Term Deposit with the bank for three years. It is adjusted against the loan only after the lock-in period is completed and the unit is found to be running satisfactorily.
Who Is Eligible for a PMEGP Loan?
- Any Indian citizen above 18 years of age.
- Minimum educational qualification: Class VIII pass for projects costing above ₹10 lakh (manufacturing) and above ₹5 lakh (service sector).
- Applicant should not have availed of any other government subsidy under a similar scheme for the same project.
- Self-Help Groups (SHGs), institutions registered under Societies Registration Act 1860, production co-operative societies, and charitable trusts are also eligible.
- The beneficiary must be setting up a new unit. Existing units or units that have already received government subsidy are not eligible.
- Only one member per family is eligible.
Activities Not Covered Under PMEGP
- Meat processing and sale, tobacco-related products, and liquor manufacturing.
- Polythene carry bags below the prescribed thickness.
- Any business involving crop cultivation (agricultural activity).
- Units already running or units that availed benefits under REGP or Pradhan Mantri Rozgar Yojana (PMRY).
How to Apply for PMEGP Loan: Step-by-Step
Step 1: Register on the PMEGP e-Portal
Visit the official PMEGP portal at kviconline.gov.in and complete the online registration. You will need to enter personal details, proposed business activity, and location.
Step 2: Prepare a Detailed Project Report
A well-prepared Project Report (DPR) is mandatory. It must include the business plan, cost of machinery, working capital requirements, projected revenue, and repayment schedule. Banks reject applications that have weak or incomplete DPRs. Using KyaTax's Project Report tool can help you create a bank-ready, structured DPR aligned with what PMEGP lenders expect.
Step 3: Submit Application to Nodal Agency
After online submission, a hard copy of the application is forwarded by the portal to the relevant nodal agency — KVIC, KVIB, or DIC — depending on your location and business type. They shortlist and interview candidates.
Step 4: Entrepreneurship Development Programme (EDP) Training
Shortlisted applicants must complete an EDP training (minimum 10 days for projects above ₹10 lakh, and 6 days for smaller projects). A training certificate is essential for loan disbursement.
Step 5: Bank Loan Processing
The nodal agency forwards your application to a scheduled commercial bank, RRB, co-operative bank, or MFI empanelled with PMEGP. The bank appraises the project and sanctions the loan based on its credit norms.
Step 6: Subsidy Disbursement
Once the loan is disbursed and the unit is set up, the bank claims the subsidy from KVIC. The subsidy amount is parked in a TDR in your account for the mandatory lock-in period of three years.
Documents Required
- Aadhaar card and PAN card
- Proof of address and date of birth
- Educational qualification certificate (Class VIII or above, where applicable)
- Caste/category certificate (for special category applicants)
- Detailed Project Report (DPR)
- EDP training certificate (submitted before final disbursement)
- Quotations for machinery and equipment
- Photographs of proposed premises
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Open Project Report tool →Frequently asked questions
Can an existing business apply for a PMEGP loan?
No. PMEGP is strictly for new units being set up for the first time. Existing businesses or units that have already received a government subsidy under any other scheme are not eligible to apply.
Which banks provide PMEGP loans in India?
Scheduled commercial banks (including SBI, Bank of Baroda, Canara Bank, and others), Regional Rural Banks (RRBs), co-operative banks, and select Micro Finance Institutions (MFIs) empanelled with KVIC are authorised to sanction PMEGP loans.
What happens to the PMEGP subsidy if the unit closes within three years?
If the unit closes or does not remain operational during the three-year lock-in period, the bank is entitled to recover the subsidy amount from the Term Deposit. The subsidy is not transferred to the borrower's account until the lock-in period is successfully completed.
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