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PMEGP Loan Subsidy Scheme – Eligibility, Subsidy Percentage & Benefits The Prime Minister’s Employment Generation Programme (PMEGP) is one of the most popular government subsidy loan schemes in India aimed at promoting self-employment and entrepreneurship. For aspiring entrepreneurs, MSMEs, and first-time business owners, the PMEGP loan subsidy scheme offers a powerful combination of bank finance and government subsidy, making business setup more affordable and sustainable. In 2026, PMEGP continues to play a vital role in supporting manufacturing and service-based businesses across rural and urban India. This blog explains the PMEGP loan subsidy scheme in detail, including eligibility, subsidy percentage, benefits, application process, and key compliance requirements. What Is the PMEGP Loan Subsidy Scheme? The PMEGP Loan Subsidy Scheme is a credit-linked subsidy program launched by the Government of India and implemented through KVIC (Khadi and Village Industries Commission), KVIBs, and DICs. The scheme supports the establishment of new micro-enterprises by providing a subsidy on bank loans, reducing the financial burden on entrepreneurs. Under PMEGP, banks provide term loans and working capital, while the government offers a margin money subsidy that does not need to be repaid, provided the business runs successfully for the required lock-in period. Objectives of the PMEGP Scheme The PMEGP scheme has multiple long-term objectives: Promote self-employment opportunities Encourage entrepreneurship among youth and women Support rural and semi-urban economic development Reduce migration from villages to cities Strengthen the MSME ecosystem in India By offering both funding and subsidy, PMEGP bridges the gap between business ideas and financial feasibility PMEGP Loan Eligibility Criteria (2026) To avail benefits under the PMEGP loan subsidy scheme, applicants must meet specific eligibility conditions. Basic Eligibility Conditions Applicant must be 18 years or above Only new business units are eligible Applicant should have passed at least 8th standard for projects above ₹10 lakh (manufacturing) or ₹5 lakh (service) Self-help groups, societies, and trusts are eligible (subject to conditions) Eligible Business Activities Manufacturing units Service enterprises Trading activities related to permitted sectors (limited) Existing businesses and units already availing government subsidies under other schemes are not eligible. PMEGP Loan Subsidy Percentage (Category-Wise) One of the most important aspects of PMEGP is the subsidy percentage, which varies based on category and location. Subsidy Structure General Category (Urban): 15% General Category (Rural): 25% Special Category (Urban): 25% Special Category (Rural): 35% The special category includes SC/ST, OBC, minorities, women, ex-servicemen, and persons with disabilities. The subsidy is credited directly to the loan account as margin money, reducing the effective loan burden. Maximum Loan Limit Under PMEGP PMEGP allows financing up to: ₹50 lakh for manufacturing units ₹20 lakh for service units The applicant must contribute a small portion of the project cost: 10% for General Category 5% for Special Category The remaining amount is financed through a bank loan and government subsidy. Benefits of the PMEGP Loan Subsidy Scheme 1. Government Subsidy Reduces Loan Burden The biggest benefit is the non-repayable subsidy, which significantly lowers the effective cost of the loan. 2. No Collateral for Small Loans Most PMEGP loans are covered under CGTMSE, reducing or eliminating collateral requirements for eligible projects. 3. Encourages First-Time Entrepreneurs PMEGP is ideal for individuals with limited capital but strong business ideas. 4. Supports Rural and Urban Businesses The scheme gives a higher subsidy to rural units, promoting balanced economic development. 5. Wide Range of Eligible Businesses From manufacturing to services like food processing, tailoring, workshops, and repair services—PMEGP supports diverse sectors. PMEGP Loan Application Process (Step-by-Step) Applying for a PMEGP loan involves both technical and financial preparation. Step 1: Prepare a Detailed Project Report A bankable project report is mandatory and should include: Business overview Project cost and means of finance Profitability projections Employment generation details Step 2: Online Application Applications are submitted through the official PMEGP portal and forwarded to the concerned implementing agency. Step 3: Screening and Interview Authorities assess project feasibility, applicant background, and business viability. Step 4: Bank Loan Sanction After approval, the bank sanctions the loan, and the subsidy is kept in a separate margin money account. Step 5: Training and Unit Setup Entrepreneurs must undergo EDP training before disbursement and start operations within the stipulated time. PMEGP Loan Interest Rate The interest rate on PMEGP loans is as per bank norms, usually aligned with MSME loan rates. The subsidy reduces the principal burden, indirectly lowering interest liability over time. Key Documents Required for PMEGP Loan Aadhaar Card PAN Card Educational certificates Caste certificate (if applicable) Project report Bank account details Training certificate (post-approval) Incomplete or inaccurate documentation is one of the main reasons for loan rejection. Common Reasons for PMEGP Loan Rejection Weak or unrealistic project report Poor credit history Ineligible business activity Incorrect subsidy category Lack of proper financial planning Professional preparation significantly improves approval chances. Importance of a CA-Certified Project Report Banks prefer CA-prepared project reports, as they: Ensure financial accuracy Improve credibility Align projections with bank norms Reduce rejection risk A strong project report is often the deciding factor in PMEGP loan approval. Conclusion: The PMEGP Loan Subsidy Scheme is one of the most powerful tools for entrepreneurs looking to start a business with limited capital. With high subsidy percentages, government backing, and bank finance, PMEGP significantly reduces startup risk. However, success under PMEGP depends on: Proper eligibility assessment Strong project report Timely compliance Professional guidance For serious entrepreneurs, PMEGP remains a highly beneficial and sustainable funding option in 2026. You can contact us at +91 9001329001 for any query or if you require our services to prepare a project report or a bank loan. FAQs 1. What is the subsidy amount under the PMEGP loan? The PMEGP subsidy ranges from 15% to 35% of the project cost, depending on the category and rural or urban location. This subsidy is non-repayable if the unit operates successfully. 2. Is the PMEGP loan available for service businesses? Yes, PMEGP loans are available for eligible service activities such as repair services, salons, food units, workshops, and other permitted enterprises. 3. Do I need collateral for a PMEGP loan? Most PMEGP loans are covered under CGTMSE, meaning collateral is generally not required, subject to bank policies and project size. 4. Can I apply for a PMEGP loan online? Yes, PMEGP applications are submitted online through the official portal and processed by KVIC, KVIB, or DIC authorities. 5. How long does PMEGP loan approval take? The PMEGP loan approval process usually takes 2 to 4 months, depending on documentation quality, bank processing time, and training completion.

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