Pradhan Mantri Employment Generation Programme (PMEGP) is a scheme launched by the Government of India, which aims to provide financial assistance to small and new businessmen in rural and urban areas of the country. This scheme provides loans to individuals, groups and coperatives who want to start a new business or expand their existing business. The main objective of PMEGP is to promote self-employment and reduce unemployment.
The interest rate on the loan provided under this scheme is very important. The interest rate plays an important role in the success of the business, as it affects the total cost of the loan. This rate depends on various factors, such as the amount of the loan, tenure, and policies set by the government.
Eligible persons have to apply to take PMEGP loan and with the loan received under the scheme, they can establish or expand their business. By taking advantage of this scheme, borrowers can get financial help at a low interest rate, which can prove beneficial for their business. In this post, we will discuss in detail the PMEGP loan interest rate, various aspects related to it and its benefits for the borrowers.
Introduction to PMEGP
Before we get into the details of interest rates, it is important to understand the context of PMEGP loans :
- Objective : The main objective of PMEGP is to generate employment in rural and urban areas, which in turn will contribute to the economic development of the country. Loans are given to start or expand small businesses in sectors such as manufacturing, services and trading.
- Loan Coverage: PMEGP provides financial assistance for setting up new projects or expanding existing projects in sectors such as food manufacturing, handicrafts, textiles and technology.
- Eligibility Criteria: Entrepreneurs who are above 18 years of age and do not have a regular income from a government job are eligible. Both new and existing micro enterprises can apply, and loans are given based on the needs and potential of the business.
PMEGP Loan Interest Rate: What to Expect?
The interest rate on the loan that you get from PMEGP scheme is a very important factor for the borrowers. The bank gives you the money for this scheme at a very low interest rate.
- Standard Interest Rate
- Interest Rate: The interest rate on loans under the PMEGP scheme usually ranges from 8% to 12% per year. This rate is set by the bank or financial institution based on the rules provided by the Ministry of MSME.
- Subsidized Rate: In some cases, the government provides subsidies or discounts on the interest rate, which significantly reduces the burden on borrowers. This is especially relevant for entrepreneurs belonging to rural areas or backward classes of society.
- Subsidy Scheme for PMEGP Loans
- the biggest benefit of the PMEGP loan scheme is the subsidy provided by the government.
- Subsidy for PMEGP loan is given at different rates depending on the category of the applicant such as
- General Category applicants: 15% subsidy on total loan amount.
- Special Category Applicants (SC/ST, Women, Minorities, EWS): 25% subsidy.
- North Eastern States: 35% subsidy.
- the biggest benefit of the PMEGP loan scheme is the subsidy provided by the government.
This subsidy helps in reducing the interest burden on the entrepreneur and makes repayment easier.
Repayment Terms
The specialty of the PMEGP loan is that its installments are made very easy, ensuring that no one faces any difficulty in repaying the loan.
- Moratorium Period: The lender temporarily stops the loan repayments (EMI or interest) during the moratorium period. During this time, the borrower doesn’t have to make any payments. This period, usually lasting a few months, gives the borrower time to start or run their business without financial pressure. After the moratorium ends, the borrower must begin repaying the loan in regular installments.
- Repayment Tenure: The loan repayment period usually ranges from 3 years to 7 years, depending on the loan amount and type of project. The interest rate remains constant throughout the tenure.
How to Apply for PMEGP Loan ?
Here is the step-by-step process to apply for a PMEGP loan
- Submit Application: Fill the PMEGP application form available on the Khadi and Village Industries Commission (KVIC) website click here or through a bank participating in the scheme.
- Project Report: Prepare a detailed project report, including a business plan, cost estimates and estimates.
- Approvals : The bank branch or the concerned government authority will scrutinize your application and check the project eligibility.
- Loan Disbursement: Once approved, the bank disburses the loan, and you receive the money in installments.
By following this process you can get your loan approved.
Benefits of PMEGP Loan Interest Rate
The PMEGP scheme offers several benefits for entrepreneurs.
- Low-interest Rates: Entrepreneurs have to pay lesser amount as compared to other loans available in the market, making it affordable.
- Subsidies : Government subsidy reduces the financial burden, making it easier to repay the loan.
- Inclusive Scheme: It encourages participation of women, SC/ST, minorities and persons with disabilities by offering lower interest rates and higher subsidies.
- Longer Repayment Period : The extended loan tenure ensures that repayment is easier.
Frequently asked Questions
- What is the PMEGP loan interest rate?
- The interest rate of PMEGP loan usually ranges between 8% to 12% per annum.
- Is any subsidy given under PMEGP loan scheme?
- Yes, the PMEGP scheme provides subsidies to make the loan more affordable. The subsidies are as follows:
- 15% subsidy for general category applicants, 25% subsidy for women, SC/ST and other special categories etc..
- Yes, the PMEGP scheme provides subsidies to make the loan more affordable. The subsidies are as follows:
- Is the interest rate on PMEGP loan fixed or variable?
- PMEGP loan comes with a fixed interest rate throughout the repayment period. This means there is no change in the interest rate during the repayment period, providing stability to the borrower.
Conclusion and Final Thoughts
The PMEGP loan interest rate is designed to be affordable and helpful for small and medium entrepreneurs. With interest rates ranging from 8% to 12% and the added benefit of government subsidy, the scheme offers an attractive opportunity for those who wish to set up or expand their small businesses. However, understanding the exact terms, including eligibility and repayment terms, is important for anyone looking to avail the loan. Always ensure that you choose the right lending institution and consider the terms carefully before proceeding with your application.
