PMEGP Loan: subsidy rates, eligibility and how the scheme actually works
PMEGP is a credit-linked subsidy scheme for setting up a new micro enterprise, administered by the Ministry of MSME through KVIC. The project cost ceiling is ₹50 lakh for manufacturing and ₹20 lakh for service or business units. The subsidy, called margin money, runs from 15% to 35% of project cost depending on whether you are a general or special category applicant and whether the unit is rural or urban. You contribute 10% as a general applicant or 5% as a special category applicant, and a bank finances the rest.
Two things worth being clear about
- There is no such thing as guaranteed approval. A subsidy under this scheme is not a grant and it is not sanction. The bank assesses the file on its own credit policy and can decline it after the task force has recommended it. The subsidy is also conditional on the unit running: it sits in a locked deposit for three years, and a unit that closes in that window can have it withdrawn and recovered.
- The loan does not come from the government. KVIC is the national nodal agency, with State KVIBs and District Industries Centres implementing it alongside the financing banks. KVIC or the DIC screens and recommends the file, but the bank sanctions the loan and holds the subsidy.
The two sectors
The ceiling follows from what the unit genuinely does. A classification the project report does not support is the kind of thing a task force interview surfaces.
| Category | Amount | Who it suits |
|---|---|---|
| Service and business | Project cost up to ₹20 lakh | A service or trading enterprise - a workshop, a repair unit, a small processing or job-work operation, a retail or service outlet. The subsidy is calculated on the project cost, so this ceiling is on the project rather than on the loan. |
| Manufacturing | Project cost up to ₹50 lakh | A manufacturing unit - fabrication, food processing, textiles, components. The higher ceiling is the main reason applicants structure a project as manufacturing, but the classification has to be genuine and the project report has to support it. |
What it costs per month
Pre-set to 9%, the reference starting rate for public sector bank lending under this scheme. There is no scheme-set rate - change it to the rate you have actually been quoted to see your real instalment, total interest and full repayment schedule.
Monthly EMI
₹20,758
₹10 Lakh at 9.00% for 5 years
Interest is 25% of the amount borrowed over this tenure.
Year-by-year repayment schedule
How each year splits between interest and principal. Early years are mostly interest, which is why prepaying early saves so much more than prepaying late.
| Year | Principal paid | Interest paid | Balance |
|---|---|---|---|
| 1 | ₹1,65,830 | ₹83,270 | ₹8,34,170 |
| 2 | ₹1,81,386 | ₹67,714 | ₹6,52,784 |
| 3 | ₹1,98,401 | ₹50,699 | ₹4,54,382 |
| 4 | ₹2,17,013 | ₹32,088 | ₹2,37,370 |
| 5 | ₹2,37,370 | ₹11,730 | ₹0 |
This calculator returns arithmetic on the figures you enter. It is not an offer, does not check your eligibility, and cannot predict the rate a lender will sanction. Loans Got Easy is an authorised Direct Selling Agent - we do not sanction, approve or disburse loans.
What the subsidy actually is, and what it is not
The margin money subsidy is real, but it does not reach you as cash. The bank receives it and holds it as a term deposit in your name for a three-year lock-in, then adjusts it against your loan. It is a capital subsidy on the project, not an interest subsidy, and it does not reduce your rate. This is the single most misunderstood part of the scheme. Applicants routinely expect the subsidy to arrive as working capital they can spend, or to lower their EMI. It does neither. Your EMI is calculated on the full bank loan, and the subsidy reduces the outstanding only when the lock-in completes and the bank adjusts it. Budget your cash flow on that basis, not on the headline percentage.
The subsidy rates in full
For a general category applicant the subsidy is 25% of project cost in a rural area and 15% in an urban area, with 10% of the cost contributed by you. For a special category applicant - SC, ST, OBC, minorities, women, ex-servicemen, physically handicapped, and applicants in the North Eastern Region, hill and border areas - it is 35% rural and 25% urban, with 5% own contribution. The bank finances the balance. Note that the rate follows the applicant and the location, not the amount borrowed - a ₹5 lakh project and a ₹40 lakh project attract the same percentage. Rural classification is decided by where the unit is located, and it is worth confirming before the project report is finalised, because the difference between rural and urban is ten percentage points of subsidy.
It funds new units only
Assistance is available only for new projects sanctioned specifically under PMEGP. An existing unit cannot be regularised into the scheme afterwards. Units already set up under PMRY, REGP or any other central or state scheme are not eligible, and neither is anyone who has already taken a government subsidy under another scheme. This disqualification catches more applicants than any other single condition, and it is worth checking honestly at the outset rather than discovering it at the task force interview. The one exception runs the other way: an existing PMEGP, REGP or Mudra unit that is performing well can apply under the separate second loan facility for upgradation.
There is no PMEGP interest rate
PMEGP does not set an interest rate. The guidelines say only that the normal rate of interest is charged, so the bank prices the loan on its own benchmark and your profile. Anyone quoting you a fixed PMEGP interest rate is describing one lender's offer, not the scheme.
Who decides
KVIC, the State KVIB or the District Industries Centre screens your application and a district-level task force interviews you, but neither sanctions the loan. The bank does, on its own credit assessment, and it can decline a file the task force has recommended. Loans Got Easy is a loan advisory and Direct Selling Agent. We help prepare and place the file. We do not sanction, approve or disburse, and we cannot influence a scheme outcome - that decision belongs to the lending institution.
Frequently Asked Questions
₹50 lakh for a manufacturing unit and ₹20 lakh for a service or business unit. Cost above the ceiling can still be funded but earns no subsidy, and you bear it. These ceilings were raised from ₹25 lakh and ₹10 lakh, and a great deal of content still online quotes the old pair.
More on PMEGP Loan
PMEGP Subsidy: how much you get, and how you actually receive it
PMEGP Eligibility: who qualifies, and what disqualifies a file
PMEGP Project Cost Limits: ₹50 lakh manufacturing, ₹20 lakh service
PMEGP Documents: what the portal, the DIC and the bank each ask for
How to Apply for PMEGP: portal, task force interview, then the bank
PMEGP for Women: 35% subsidy, 5% contribution, and what changes in practice
PMEGP Second Loan: upgradation for existing PMEGP, REGP and Mudra units
PMEGP in Telangana and Andhra Pradesh: agencies, banks and what to expect
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Loans Got Easy is a loan advisory and Direct Selling Agent. We help prepare and place the file. We do not sanction, approve or disburse, and we cannot influence a scheme outcome - that decision belongs to the lending institution.