Subsidised small business loans to first time micro entrepreneurs

Prime Minister’s Employment Generation Programme (PMEGP)

The GOI (Government of India) is currently accepting applications under PMEGP, a programme which allows a subsidised small business loan (subsidy up to 35% of the project cost) to first time entrepreneurs. FineTrain brings you details of how you can benefit from the scheme…

What is PMEGP?

Prime Minister’s employment generation programme (PMEGP) is a credit linked subsidy programme to support generation of self-employment through setting up of Micro (enterprises with investment of Rs. 25 lakhs or less) enterprises in rural and urban areas.

“Credit linked” means that subsidy is linked to the bank credit and is only available if the unit /enterprise is able to secure a bank loan for the remaining amount (project cost minus subsidy –minus his own contribution).


Small Business - take benefit of various schemes meant for you.
Small Business – take benefit of various schemes meant for you.

How much subsidy do I get?

Categories of beneficiaries under PMEGPBeneficiary’s contribution (of project cost)Rate of subsidy of project cost
General category10%15%25%
Special (Women, SC, ST, OBC, Ex-service men, physically handicapped, Entrepreneurs from North Eastern Areas, Hill areas and Border areas)5%25%35%

 The rate of subsidy varies from 15% (on projects located in urban areas and promoted by a general category male) to 35% (project located in rural area and promoted by special category entrepreneurs). The remaining amount (excluding beneficiary’s contribution and subsidy) has to be met through a bank loan.

Eligibility Criteria

  • You should be above 18 years of age and first time entrepreneur
  • PMEGP is applicable to all new viable micro enterprises, including Village Industries projects except activities indicated in the negative list of Village Industries (please see annexure1)
  • The maximum cost of the project/unit admissible under manufacturing sector is Rs. 25 lakh. The maximum cost of the project/unit admissible under business/service sector is Rs. 10 lakh

Where do I apply for the scheme?

You can apply online on PMEGP website ( and submit the printout of the application along with the required documents to your nearest KVIC (Khadi and Village Industries Commission) office or DIC (district Industry Centre).  A link to the application from is given below-

You can also submit the hardcopy of the application directly to nearest KVIC office or DIC office.

Further, you can also check with your nearest government bank if they would like to sponsor/recommend your application.

What are my chances of getting selected?

GOI receives huge number of applications, with less than 20% getting selected. So your project has to be viable and should generate local employment.

What is the selection process?

The PMEGP applicants are shortlisted through an interview process. The interview panel comprises KVIC, DIC and bank officers.

What is the process of getting a loan?

Once you are selected, you need to visit the bank branch (you need to mention the name of bank/branch in your application) to start the loan process. Once the first two instalments of the loan are disbursed, the GOI credits the subsidy in the same account.

How long does it take to get the loan?

The time period could be up to 6  to 9 months from the date of application. The applications are invited in July-August. The interviews and selection takes place by December/January and loan could be disbursed by April/May.

How can FineTrain assist you?

We can assist you understand viability and eligibility of your project and assist you in the preparation and submission of the project report and application.

Annexure I

List of industries not allowed under PMEGP 

(1)Any industry/business connected with Meat(slaughtered),i.e. processing, canning and/or serving items made of it as food, production/manufacturing or sale of intoxicant items like Beedi/Pan/ Cigar/Cigarette etc., any Hotel or Dhaba or sales outlet serving liquor, preparation/producing tobacco as raw materials, tapping of toddy for sale.
(2)Any industry/business connected with cultivation of crops/ plantation like Tea, Coffee, Rubber etc. sericulture (Cocoon rearing), Horticulture, Floriculture, Animal Husbandry like Pisciculture, Piggery, Poultry, Harvester machines etc.
(3)Manufacturing of Polythene carry bags of less than 20 microns thickness and manufacture of carry bags or containers made of recycled plastic for storing, carrying, dispensing or packaging of food stuff and any other item which causes environmental problems.
(4)Industries such as processing of Pashmina Wool and such other products like hand spinning and hand weaving, taking advantage of Khadi Programme under the purview of Certification Rules and availing sales rebate.
(5)Rural Transport (Except Auto Rickshaw in Andaman & Nicobar Islands, House Boat, Shikara & Tourist Boats in J&K and Cycle Rickshaw).

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  1. Dear Sir/Concerned,

    I am running a small retail business for dealing in tyres & tubes for passenger cars. Now I would like to add my business expansion by purchasing tyre changer, wheel balancer, Air compressor & other accessories worth near 6 lakhs. Can I opt for subsidized business loan ? If yes plz let me know the procedures. Thanq.

  2. I got my first installment during the first week of June 2017. After doing the maintenance of my shop,i visited the bank to enqiure for their inspection and second installment. But they replied me that subsidy hasn’t come. Only when subsidy comes,ill get my second installment and subsidy. Im in a full of confusion about this PMEGP loan. How long do i have to wait for my second installment? I can’t start my business without money for buying raw materials! What if the subsidy comes only after a year or two?! Is it not the centre that has allocated the full amount for the PMEGP? Please enlighten me…

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