PMEGP Second Loan: upgradation for existing PMEGP, REGP and Mudra units
The PMEGP second loan is a separate facility for upgrading an existing well-performing PMEGP, REGP or Mudra unit. Project cost ceilings are ₹1 crore for manufacturing and ₹25 lakh for service or business, with maximum subsidy of ₹15 lakh and ₹3.75 lakh respectively. The subsidy rate is a flat 15% for all categories, with 10% own contribution - the general and special category split does not apply here.
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on the unit running: it sits in a locked deposit for three years, and a unit that closes in that window can have it withdrawn and recovered.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.
This is the route for an existing business
The main PMEGP scheme funds new units only, which leaves anyone already trading ineligible. The second loan facility is the exception, and it is widely omitted from published guidance - a substantial number of business owners conclude they cannot use PMEGP at all when in fact this route is open to them. If you run a unit set up under PMEGP, REGP or Mudra and you have repaid on time, you can apply to upgrade.
The ceilings and the flat rate
₹1 crore project cost for manufacturing with maximum subsidy of ₹15 lakh, and ₹25 lakh for service with maximum subsidy of ₹3.75 lakh. Units in the North Eastern Region and hill states get ₹20 lakh and ₹5 lakh respectively at a 20% rate. Everywhere else the rate is a flat 15% regardless of category, and own contribution is 10% for everyone. A woman or SC applicant does not get 35% here - that split belongs to the new-unit scheme only, and assuming otherwise is a common and expensive misreading.
The Mudra connection
An existing Mudra borrower is explicitly eligible for PMEGP upgradation. This is the practical path for a micro enterprise that started on a Shishu or Kishore loan, has traded and repaid well, and now needs capital at a scale Mudra cannot reach even at the ₹20 lakh Tarun Plus ceiling. It is worth knowing before applying for a further Mudra loan by default.
Conditions
Upgradation is subject to lock-in and repayment conditions on the earlier loan - the existing unit has to have performed. 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. 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
Yes, through the upgradation facility, if you run an existing PMEGP, REGP or Mudra unit that has repaid on time. Project cost ceilings are ₹1 crore for manufacturing and ₹25 lakh for service.
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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.