A pmegp loan is a bank loan for a new micro enterprise that comes with a government capital subsidy under the Prime Minister’s Employment Generation Programme. The subsidy, called margin money, ranges from 15% to 35% of the project cost. Projects can cost up to ₹50 lakh in manufacturing and ₹20 lakh in services, and you bring only 5% to 10% yourself.
This guide explains the subsidy rates, eligibility, documents, the online process and the mandatory training. Moreover, it shows worked examples so you can see the real loan, subsidy and EMI for a typical project.
Quick answer: Under a PMEGP loan, the bank finances 90% to 95% of a new unit’s project cost. The government then adjusts a subsidy of 15% to 35% against the loan after three years. You apply online on the KVIC PMEGP portal, the KVIC, KVIB or DIC office forwards the file to a bank, and you complete Entrepreneurship Development Programme (EDP) training before the subsidy is released.
Key Takeaways
- Maximum project cost: ₹50 lakh for manufacturing and ₹20 lakh for service or business units.
- Subsidy: 15% (urban) or 25% (rural) for general applicants; 25% or 35% for special categories.
- Own contribution: 10% for general applicants and 5% for special categories.
- Only new units qualify; existing units or those that received another government subsidy do not.
- Projects above ₹10 lakh (manufacturing) or ₹5 lakh (services) need Class VIII pass.
What Is a PMEGP Loan?
PMEGP is a credit-linked subsidy scheme of the Ministry of MSME. It began in 2008-09 by merging two older schemes, PMRY and REGP. The Khadi and Village Industries Commission (KVIC) is the national nodal agency.
Three agencies implement it at the ground level: KVIC, state Khadi and Village Industries Boards (KVIB) and District Industries Centres (DIC). Banks sanction the PMEGP loan, while the government provides the subsidy through the bank. As a result, the borrower repays only the loan minus the subsidy.
Scheme status in 2026The government approved PMEGP up to 31 March 2026 and has taken up its continuation. KVIC kept releasing margin money and launching new units in September 2026. Still, check the latest notice on the KVIC PMEGP portal before you apply.
PMEGP Loan Subsidy Rates
The subsidy depends on your category and the location of the unit. Rural areas and special-category applicants get the highest rates.
| Category of beneficiary | Own contribution | Subsidy (urban) | Subsidy (rural) |
|---|---|---|---|
| General category | 10% | 15% | 25% |
| Special category* | 5% | 25% | 35% |
*Special category includes SC, ST, OBC, minorities, women, ex-servicemen, transgender persons, persons with disabilities, and applicants from the North-East, hill and border areas and aspirational districts.
How the subsidy works in practice
The bank keeps the subsidy in a fixed deposit (TDR) in your name for three years. The bank charges no interest on that portion of the PMEGP loan. After three years, and if the unit is running, the bank adjusts the subsidy against the loan. Try different costs and categories in our PMEGP loan calculator.
PMEGP Loan Example: How Much Do You Repay?
Take a ₹10 lakh manufacturing project by a woman entrepreneur in a rural area. She belongs to the special category, so she brings 5% and gets a 35% subsidy.
| Item | Amount |
|---|---|
| Project cost | ₹10,00,000 |
| Own contribution (5%) | ₹50,000 |
| PMEGP loan sanctioned (95%) | ₹9,50,000 |
| Margin money subsidy (35%) | ₹3,50,000 |
| Effective loan after subsidy | ₹6,00,000 |
| Approx. EMI on ₹6 lakh at 11% for 5 years | ₹13,045 |
In contrast, a general-category applicant in a city brings ₹1 lakh and gets a ₹1.5 lakh subsidy on the same project. Therefore, the effective loan rises to ₹7.5 lakh. Location and category change the economics a lot, so check both carefully.
Project Cost Limits Under a PMEGP Loan
| Sector | Maximum project cost | Education needed above |
|---|---|---|
| Manufacturing | ₹50 lakh | ₹10 lakh project cost |
| Service or business | ₹20 lakh | ₹5 lakh project cost |
Project cost includes capital expenditure and one cycle of working capital. Land cost is excluded. Also, a ready-built or long-lease workshop can count in the project cost, but only up to three years’ rent.
Working capital can form a large part of a service unit’s cost. Accordingly, size it realistically, because banks cut inflated figures. Our working capital loan calculator helps here.
Who Is Eligible for a PMEGP Loan?
- Any individual aged 18 years or above.
- Class VIII pass for manufacturing projects above ₹10 lakh and service projects above ₹5 lakh.
- Self-help groups, including those under BPL, that have not taken benefits under another scheme.
- Institutions registered under the Societies Registration Act, production cooperative societies and charitable trusts.
- Only new projects; one person per family can get assistance.
Who is not eligible
Existing units, and units that already received a government subsidy under any other central or state scheme, cannot apply. Similarly, certain activities on the negative list, such as meat processing, tobacco and liquor businesses, are excluded.
Before you apply, register the unit on Udyam where possible. Our guide to MSME registration online explains the free process.
Documents Needed for a PMEGP Loan
| Document | Purpose |
|---|---|
| Aadhaar and PAN | Identity and KYC |
| Passport-size photograph | Application form |
| Project report | Cost, means of finance and profitability |
| Education certificate | For projects above the education threshold |
| Caste or special category certificate | To claim the higher subsidy |
| Rural area certificate | To claim the rural subsidy rate |
| EDP training certificate | Required before subsidy release |
| Quotations for machinery | Basis for project cost |
The project report carries the most weight with the bank. Prepare it with our project report maker, and read the project report for bank loan guide to see what bankers check.
How to Apply for a PMEGP Loan Online
- Open the PMEGP e-portal on the official KVIC website and choose the application form for individuals or non-individuals.
- Fill in personal details, Aadhaar, category, education, unit location and the proposed activity.
- Enter project cost, own contribution and the preferred bank branch, then upload the project report and documents.
- Submit the form and note the application ID; the KVIC, KVIB or DIC office scrutinises it.
- A District Level Task Force Committee reviews the proposal and forwards it to the chosen bank.
- The bank appraises the project, sanctions the PMEGP loan and seeks the margin money from KVIC.
- Complete EDP training, then the bank releases the loan and the subsidy goes into a three-year TDR.
Practical tipPick a bank branch near your unit that already handles PMEGP files. Furthermore, keep machinery quotations from registered suppliers, because banks pay suppliers directly in most cases.
EDP training
Entrepreneurship Development Programme (EDP) training is compulsory before the bank releases the subsidy. It teaches basic accounts, marketing and compliance. KVIC has also launched an online EDP portal and mobile app, which makes the training easier for rural applicants.
PMEGP Loan Interest Rate, Tenure and Collateral
| Feature | Details |
|---|---|
| Interest rate | Normal bank rate for MSME loans; no interest on the subsidy held in TDR |
| Repayment | 3 to 7 years after the initial moratorium |
| Moratorium | Usually 6 to 18 months, as the bank decides |
| Collateral | Not needed for loans up to ₹10 lakh; higher loans can get CGTMSE cover |
| Subsidy lock-in | Three years in TDR before adjustment |
Banks commonly cover larger PMEGP loans under CGTMSE instead of asking for property. Estimate that guarantee charge with our CGTMSE fee calculator, and check repayment strength with the DSCR calculator.
Second PMEGP Loan for Expansion
Existing PMEGP units that performed well can apply for a second loan to upgrade or expand. The unit must have repaid the first loan on time and must show good turnover.
| Feature | Second loan |
|---|---|
| Maximum project cost (manufacturing) | ₹1 crore |
| Maximum project cost (services) | ₹25 lakh |
| Subsidy | 15% (20% in North-East and hill states) |
| Own contribution | 10% |
PMEGP Loan vs Mudra Loan
Both schemes help micro units, but they work differently. A PMEGP loan gives a subsidy for new units, while a Mudra loan offers collateral-free credit for new and existing units without a subsidy. Read our full Mudra Loan Yojana guide for its categories.
| Point | PMEGP loan | Mudra loan |
|---|---|---|
| Subsidy | 15% to 35% | None |
| New or existing units | New units only | Both |
| Maximum amount | ₹50 lakh project (manufacturing) | ₹20 lakh (Tarun Plus) |
| Training | EDP compulsory | Not required |
| Processing time | Longer (task force and bank) | Shorter |
Existing SBI customers who need a small amount fast can also try the SBI e Mudra loan route instead.
Why PMEGP Loan Applications Get Rejected
- Unrealistic project report: sales or margins far above industry norms.
- Ineligible activity: the activity sits on the negative list.
- Existing business: the applicant already runs the same unit.
- Poor credit score: past defaults or a low CIBIL score.
- Location mismatch: the unit is far from the chosen bank branch.
- Incomplete documents: missing quotations, category or rural certificates.
If you are still choosing an activity, our list of the best business ideas in India shows ideas that fit PMEGP limits. For the full roadmap, see how to start a business in India.
Sample Projects That Fit a PMEGP Loan
The scheme covers a wide range of village and small-town activities. The table below shows typical projects, with a rough project cost and the subsidy a general-category rural applicant would get.
| Project | Sector | Typical project cost | Subsidy at 25% (general, rural) |
|---|---|---|---|
| Flour mill (atta chakki) | Manufacturing | ₹6,00,000 | ₹1,50,000 |
| Paper plate and dona making | Manufacturing | ₹8,00,000 | ₹2,00,000 |
| Cattle feed unit | Manufacturing | ₹25,00,000 | ₹6,25,000 |
| Bakery and confectionery | Manufacturing | ₹15,00,000 | ₹3,75,000 |
| Mobile and electronics repair shop | Service | ₹3,00,000 | ₹75,000 |
| Beauty parlour | Service | ₹5,00,000 | ₹1,25,000 |
| Tent house and catering | Service | ₹12,00,000 | ₹3,00,000 |
These figures are indicative only. Therefore, build your own estimate from local machinery quotes and rents before you apply for a PMEGP loan.
What Happens After the PMEGP Loan Is Sanctioned
Sanction is not the end of the process. Several checks follow before the subsidy finally reduces your loan.
- Disbursement: the bank pays machinery suppliers directly and releases working capital in stages.
- Physical verification: KVIC or its agencies verify that the unit exists and works, often with geo-tagged photos.
- TDR period: the subsidy stays in a three-year deposit while you repay the rest of the PMEGP loan.
- Subsidy adjustment: after three years, the bank adjusts the subsidy if the unit is running and the account is regular.
However, the bank can recover the subsidy if the unit closes, the asset is sold or the money is misused. Consequently, keep the unit running, keep purchase bills and file simple accounts every year.
Tips to Get Your PMEGP Loan Approved Faster
- Choose an activity you understand and can explain to the task force committee.
- Use realistic sales and margins; bankers compare them with similar units.
- Arrange your own contribution in your bank account before the interview.
- Pick a branch close to the unit, because banks prefer to monitor nearby borrowers.
- Keep a clean credit record and clear any small overdue loans first.
- Finish EDP training early so it does not delay disbursement.
Additionally, follow up with the DIC or KVIC office if the file sits idle for weeks. A polite visit with your application ID often moves a PMEGP loan file forward.
Frequently Asked Questions About the PMEGP Loan
What is the maximum PMEGP loan amount?
The maximum project cost is ₹50 lakh for manufacturing and ₹20 lakh for service or business units. The bank finances 90% to 95% of that cost, depending on your category.
How much subsidy is given under PMEGP?
General applicants get 15% in urban areas and 25% in rural areas. Special-category applicants get 25% in urban areas and 35% in rural areas.
Is collateral required for a PMEGP loan?
Banks generally do not ask for collateral on loans up to ₹10 lakh. Larger PMEGP loans can be covered under CGTMSE instead of property.
Can an existing business get a PMEGP loan?
No. The first PMEGP loan is only for new units. However, existing PMEGP units with a good repayment record can apply for a second loan for upgradation.
Is EDP training compulsory for PMEGP?
Yes. The bank releases the margin money subsidy only after the applicant completes Entrepreneurship Development Programme training. KVIC now offers it online as well.
When is the PMEGP subsidy adjusted against the loan?
The bank holds the subsidy in a three-year term deposit and adjusts it against the loan after three years, provided the unit is still running.
What is the interest rate on a PMEGP loan?
Banks charge their normal MSME lending rate. However, they charge no interest on the portion of the loan equal to the subsidy held in the TDR.
Where do I apply for a PMEGP loan?
Apply online on the PMEGP e-portal on the official KVIC website. The application then goes through KVIC, KVIB or DIC to your chosen bank.
Is a PMEGP Loan Right for You?
A PMEGP loan suits first-time founders who want to start a manufacturing or service unit with a strong subsidy. The process is slower than a Mudra loan, yet a 25% to 35% subsidy can cut your repayment sharply.
Run your numbers in the PMEGP calculator, then explore all tools on the free business tools page. For more schemes, browse our business loans and schemes section or visit the Business Reports homepage.
Business Reports is an independent information website. We are not affiliated with, endorsed by or acting for any government department, bank, NBFC, KVIC, NABARD, SIDBI or MUDRA, and we do not provide loans or process applications. Figures are indicative; confirm details on official portals or with your bank. Read our disclaimer and advertising disclosure.