Context
Recently, the RBI amended the MSME lending directions, doubling the collateral-free loan limit from ₹10 lakh to ₹20 lakh for Micro and Small Enterprises (MSEs). Banks have been instructed not to demand collateral for such loans and to mandatorily extend this benefit to all units financed under the Prime Minister’s Employment Generation Programme (PMEGP), with the objective of improving last-mile credit access for entrepreneurs lacking tangible assets.
About PMEGP
The PMEGP is a flagship Central Sector Scheme aimed at generating self-employment opportunities through the establishment of micro-enterprises in the non-farm sector.
1. Origin and Administration
- Genesis: It was launched in 2008 by merging two erstwhile schemes: the Prime Minister’s Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP).
- Nodal Ministry: It is administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME).
2. Implementation Framework
- National Level: The Khadi and Village Industries Commission (KVIC) serves as the single nodal agency for implementation across the country.
- State Level: Implementation is carried out through State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs), District Industries Centres (DICs), and banks.
- Recent Update: All implementing agencies (KVIC, KVIB, DIC) are now permitted to receive and process applications for both rural and urban areas.
3. Eligibility Criteria
- Age: Any individual above 18 years of age is eligible.
- Educational Qualification: For projects costing above ₹10 lakh in the manufacturing sector and above ₹5 lakh in the business/service sector, the beneficiary must have passed at least Class VIII.
- Income Limit: There is no income ceiling for setting up projects under PMEGP.
- Entities: Self-help Groups (SHGs), Institutions registered under the Societies Registration Act, 1860, Production Co-operative Societies, and Charitable Trusts are also eligible.
- New Projects Only: Assistance is provided only for setting up new units; existing units are not eligible for the first loan.
4. Financial Assistance and Subsidy (Margin Money)
The scheme is a credit-linked subsidy program. The government provides “Margin Money” (subsidy) which is routed through banks.
| Category of Beneficiary | Beneficiary Contribution | Subsidy (Urban) | Subsidy (Rural) |
| General Category | 10% | 15% | 25% |
| Special Category* | 05% | 25% | 35% |
Special Category Includes: SC/ST, OBC, Minorities, Women, Ex-servicemen, Differently-abled, NER (North Eastern Region), Hilly and Border areas.
5. Maximum Project Cost
- Manufacturing Sector: Up to ₹50 lakh.
- Service Sector: Up to ₹20 lakh.
- Upgradation (2nd Loan): For well-performing existing PMEGP/MUDRA units, a second loan of up to ₹1 crore (Manufacturing) and ₹25 lakh (Service) is available with a 15% subsidy (20% for NER/Hilly areas).
Q. With reference to the Prime Minister’s Employment Generation Programme (PMEGP), consider the following statements:
1. It is a Centrally Sponsored Scheme implemented by the Ministry of Rural Development.
2. Under this scheme, there is no income ceiling for beneficiaries to set up new micro-enterprises.
3. For special category beneficiaries in rural areas, the government provides a margin money subsidy of 35% of the project cost.
How many of the above statements are correct?
A) Only one
B) Only two
C) All three
D) None
Correct Answer: B (Only two)
Explanation:
• STATEMENT 1 INCORRECT: PMEGP is a Central Sector Scheme (not Centrally Sponsored) and is administered by the Ministry of Micro, Small and Medium Enterprises (MSME), not the Ministry of Rural Development.
• STATEMENT 2 CORRECT: There is no income ceiling for assistance in setting up projects under the PMEGP guidelines.
• STATEMENT 3 CORRECT: Special category beneficiaries (SC/ST, Women, etc.) are entitled to a 35% subsidy in rural areas and a 25% subsidy in urban areas.
