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Loans

PMEGP Loan: Eligibility, Subsidy Rates and Project Limits

PMEGP pays 15% to 35% of a new micro unit's cost as subsidy on a bank loan, for projects up to ₹50 lakh (manufacturing) or ₹20 lakh (services).

AI

Written by Ananya Iyer

Updated on 17 September 2026·7 min read

On this page11 sections
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PMEGP is a subsidy linked to a bank loan for starting a new micro enterprise. Banks lend towards projects of up to ₹50 lakh in manufacturing or ₹20 lakh in business and services. The government pays 15% to 35% of the project cost as margin money subsidy, depending on your category and whether the unit is urban or rural.

Status on 16 September 2026: the PMEGP portal shows the notice “Fresh application submission under PMEGP is presently unavailable. The facility will be enabled upon approval for continuation of the Scheme with the revised guidelines by the competent authority.” The scheme was approved up to 2025-26, and the 2026-27 Budget allocates ₹4,500 crore to it, but new online applications are paused until the continuation is approved. Check the notice on pmegp.msme.gov.in before you prepare an application.

Key facts

Item Detail
Full name Prime Minister’s Employment Generation Programme (PMEGP)
Ministry and nodal agency Ministry of MSME; Khadi and Village Industries Commission (KVIC)
Other implementing agencies State KVIC offices, State KVIBs, District Industries Centres (DICs); Coir Board for coir units
Maximum project cost for subsidy ₹50 lakh (manufacturing); ₹20 lakh (business/service)
Subsidy 15% to 35% of project cost
Your contribution 10% (general) or 5% (special category)
Minimum age Above 18 years; no income ceiling
Repayment 3 to 7 years after an initial moratorium
Interest Normal bank rate
Application Online only, on KVIC’s PMEGP e-portal

Is the scheme open in 2026-27?

The Ministry of MSME approved PMEGP for the five years from 2021-22 to 2025-26, with an outlay of ₹13,554.42 crore. That approval raised the project cost caps to the current ₹50 lakh and ₹20 lakh.

The Budget 2026-27 note from PIB describes PMEGP as a running scheme. News reports in June 2026 said KVIC had released ₹504.68 crore of subsidy for 22,259 new units. We could not find a published order extending the scheme beyond March 2026, so check the PMEGP e-portal for the current position before you prepare a project.

What PMEGP funds, and what it does not

PMEGP backs new, viable micro enterprises in manufacturing, services and village industries. Banks can lend the capital cost as a term loan and working capital as cash credit, or combine the two.

ItemDetails
Only new projects.Existing units, and units that have already taken a government subsidy under another central or state scheme, cannot apply for a first PMEGP loan.
Capital spending is required.A project with no capital expenditure is not eligible.
Land is excluded.The cost of land cannot be part of the project cost. Rent or lease on a ready-built work shed can be counted for up to three years.
Working capital limits.Working capital can be at most 40% of project cost in manufacturing and 60% in service or trading units.
Trading is restricted.Pure sales outlets are allowed mainly in the North East, Left Wing Extremism-affected districts and the Andaman and Nicobar Islands. Elsewhere a shop must sell KVIC-certified or PMEGP/SFURTI cluster products, or be backed by manufacturing or service facilities.
Negative list.Activities on the scheme’s negative list, or barred by local authorities, are not funded.

If your project costs more than the cap, the bank can lend the extra, but no subsidy is paid on it.

Who can apply

  • Any individual above 18 years of age. There is no income limit.
  • For projects above ₹10 lakh in manufacturing or above ₹5 lakh in business/service, you must have passed at least Class VIII.
  • Only one person per family can get PMEGP help. Family means you and your spouse.

You must also complete Entrepreneurship Development Programme (EDP) training. If you have already done at least 10 days offline or 60 hours online of EDP, ESDP or vocational training, you need not repeat it.

Subsidy rates by category and area

Category Your contribution Subsidy, urban unit Subsidy, rural unit
General 10% 15% 25%
Special 5% 25% 35%

The special category covers SC, ST, OBC, minorities, women, ex-servicemen, transgender persons, persons with disabilities, and applicants from the North East, aspirational districts, and hill and border areas. Areas under a panchayat count as rural and areas under a municipality count as urban.

The bank lends the rest: 90% of project cost for general applicants and 95% for special category applicants.

Worked example

Take a ₹10 lakh manufacturing project. A general-category applicant in a town puts in ₹1 lakh, the bank lends ₹9 lakh, and the subsidy is ₹1.5 lakh. A woman applicant setting up in a village puts in ₹50,000, the bank lends ₹9.5 lakh, and the subsidy is ₹3.5 lakh. Run the loan through our EMI calculator to check the instalment your cash flow must carry.

How the subsidy lock-in works

The subsidy does not come to you as cash. KVIC routes it through the bank, which holds it for three years in a term deposit in your name. According to the guidelines as summarised by Banking School, no interest is paid on that deposit and no interest is charged on the matching part of your loan.

After three years, the bank adjusts the subsidy against your loan. If the loan goes bad before then, the bank can use the subsidy to reduce your dues. If your actual spending at the end of the third year is below the sanctioned amount, the extra subsidy goes back to KVIC.

Second loan for upgrading a unit

An existing PMEGP, REGP or Mudra unit can take a second loan to expand or modernise.

Sector Maximum project cost Subsidy Maximum subsidy
Manufacturing ₹1 crore 15% (20% in NER and hill states) ₹15 lakh (₹20 lakh)
Business/service ₹25 lakh 15% (20% in NER and hill states) ₹3.75 lakh (₹5 lakh)

Your contribution is 10% in all categories. To qualify, the first-loan subsidy must have been adjusted after its three-year lock-in. The first loan must have been repaid on time, and the unit must be making a profit with good turnover.

Documents

  • Aadhaar, which is authenticated before you can fill the form
  • Project report
  • Caste certificate or special-category certificate, where it applies
  • Rural area certificate, for a rural unit
  • Education, EDP or skill training certificate
  • Any other document the agency or bank asks for

Once your unit is running, register it on the Udyam portal; our Udyam registration guide covers the free process.

How to apply

  1. Go to the PMEGP e-portal on kviconline.gov.in and choose the application form for a new unit (or the form for upgradation).
  2. Authenticate your Aadhaar and fill in your personal, project and bank details.
  3. Pick your implementing agency (KVIC, KVIB or DIC) and your preferred bank branch.
  4. Upload your photo, project report and certificates.
  5. Submit and note your application ID; the login details are sent to your mobile.
  6. Attend the agency’s review; the agency forwards your file to the bank.
  7. Complete EDP training if needed, then sign the loan documents once the bank sanctions.

The portal generates a self-assessed score from your answers, and agencies use a scorecard to appraise files. Inflating the project cost to get a bigger subsidy is not allowed. For other central options, see our round-up of government business loan schemes.

Frequently asked questions

How much subsidy do I get under PMEGP?

15% (urban) or 25% (rural) of project cost for general applicants, and 25% (urban) or 35% (rural) for special category applicants.

What is the maximum PMEGP loan?

Subsidy is paid on projects of up to ₹50 lakh in manufacturing and ₹20 lakh in business/service. Banks may lend more, without subsidy on the extra.

Is PMEGP only for new businesses?

The first loan is only for new units. An existing PMEGP, REGP or Mudra unit can apply for a second loan to upgrade.

What education do I need for PMEGP?

None for smaller projects. You need at least Class VIII for projects above ₹10 lakh in manufacturing or ₹5 lakh in services.

Is PMEGP interest-free?

No. Banks charge their normal rate, though no interest is charged on the part of the loan matching the subsidy during the three-year lock-in.

Can a husband and wife both get PMEGP?

No. Only one person per family is eligible, and family means self and spouse.

Sources

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