India boasts the highest population of individuals within 25 to 40 years of age. They represent the backbone of the nation, working in various sectors across the nation.
Unfortunately, despite her growing economy, India suffers from a long-standing high employment rate, plaguing the nation’s youth primarily. According to a report published in the Economic Times, India’s current unemployment rate stands at almost 6%, a substantial number considering her overall population.
To tackle this situation, the Government of India introduce several initiatives to boost employment opportunities. The Prime Minister’s Employment Generation Programme (PMEGP) is one such credit-linked subsidy scheme that was initiated to encourage and generate self-employment opportunities for eligible candidates.
Under this scheme, a PMEGP loan is provided to unemployed individuals and traditional artisans, especially for the creation of various micro-enterprises in non-farm sectors. This advance offers all the benefits of MSME loans.
This scheme was introduced in lieu of two separate programmes, namely, the Rural Employment Generation Programme and the Prime Minister’s Rojgar Yojana in 2008.
Following is an overview of the purpose and objectives of this programme:
Purpose of Prime Minister Employment Generation Programme (PMEGP) –
As PMEGP full form suggests, the main aim of this programme is to generate employment opportunities, especially in the small and micro-enterprise sector of the economy. This programme, administered by the Ministry of Micro, Small and Medium Enterprises, aims to fulfil the following objectives .
- Generation of employment in both rural and urban areas of the country through various self-employment projects and micro-enterprise ventures.
- Creation of self-employment opportunities for traditional artisans and unemployed youth at their residential location.
- Generating sustainable and regular employment for the country’s unemployed rural youth and skilled workers to stop them from relocating to urban areas for employment.
- To increase the quantum of an artisan’s income and boost the employment rate in both rural and urban areas.
To fulfil these objectives, the scheme has introduced the PMEGP loan, where beneficiaries can avail of a subsidy of 15-35% of their project’s cost from the government. The scheme also pays special attention to reduce challenges that every small business owners face.
What is the loan limit under PMEGP scheme?
Under this scheme, individuals can avail of a loan ranging between Rs. 9.5 Lakh and Rs. 23.75 Lakh. For the manufacturing sector, the maximum cost of each project is set at Rs. 25 Lakh, while for the business sector, this limit is fixed at Rs. 10 Lakh.
This scheme requires beneficiaries to contribute 5-10% of their loan amount while the financial institution sanctions the remaining 90-95%. The amount sanctioned by financial institutions will be available as term loans.
Out of the 90-95% sanctioned amount from the financial institution, borrowers will have to repay only 60-75% of the project’s cost, and the rest will be covered under the PMEGP scheme.
Moreover, you will also have the facility to avail of a business loan from any financial institution even after availing such subsidised credit. Companies like Bajaj Finserv provides a high amount value of up to Rs. 30 Lakh to finance requirements of a small business, at affordable interest rates.
Other crucial PMEGP loan details –
Following are a few pertinent details for applicants looking to avail a loan under the Prime Minister’s Employment Generation Programme –
- Repayment tenor for this advance ranges between 3 and 7 years after the completion of an initial moratorium period.
- Interest rates of PMEGP loans are at par with regular rates, ranging between 11% and 12%.
- Borrowers do not have to pledge collateral for loans of up to Rs. 10 Lakh. For projects above Rs. 10 Lakh borrowers have to pledge security according to the terms set by lenders.
- For a few projects with the cost ranging between Rs. 5 Lakh and Rs. 25 Lakh, the Credit Guarantee Fund Trust for Micro and Small Enterprises, provides the collateral guarantee.
With these loans from PMEGP, individuals can set up their businesses easily. Alternatively, for higher loan amount requirements, they can look into funding options provided by other financial institutions. The easy availability of credit and borrower-friendly repayment policy is likely to help boost India’s economy by a significant margin.