Prime Minister's Employment Generation Programme (PMEGP)

The Prime Minister's Employment Generation Programme (PMEGP) is the Government of India's flagship credit-linked subsidy scheme for setting up new micro-enterprises in the non-farm sector, administered by the Khadi and Village Industries Commission (KVIC) under the Ministry of MSME, alongside State KVI Boards (KVIB) and District Industries Centres (DIC).

Under the revised scheme guidelines, the maximum project cost eligible for margin-money subsidy is ₹50 lakh for manufacturing units and ₹20 lakh for service or trading units. The government subsidy — called margin money — ranges from 15% to 35% of the project cost depending on the applicant's category and location: general-category applicants receive 15% in urban areas and 25% in rural areas, while special-category applicants (SC, ST, OBC, minorities, women, ex-servicemen, persons with disabilities, and residents of hilly/border areas) receive 25% in urban areas and 35% in rural areas.

The beneficiary must contribute a minimum of 10% of the project cost from their own funds (5% for special-category applicants); the remaining balance is financed by the bank as a term loan plus working capital, with banks typically financing 90-95% of the project cost.

For existing PMEGP, REGP or MUDRA units that have repaid their first loan and want to expand, PMEGP also offers a second loan (upgradation) of up to ₹1 crore for manufacturing units and ₹25 lakh for service units, carrying a 15% subsidy.

The margin-money subsidy is non-repayable once the unit is established and operational for three years, at which point it is credited into the beneficiary's loan account, reducing the outstanding term loan rather than being paid out upfront.