We have been receiving lots of queries from our readers about Prime Minister’s Employment Generation Programme (PMEGP). Some of the frequently asked questions are answered here.
- Q: I’m in the business of readymade garments, hosiery goods, other articles of clothing and clothing accessories such as gloves, ties, braces etc. Whether I’m eligible for loan under PMEGP?
Reply: You are not eligible for loan under PMEGP. The financial assistance is provided only to the first generation entrepreneurs in the form of margin money.
- Q : What is the last date for applying to loan under PMEGP scheme?
Reply: The State/Divisional Directors of KVIC in consultation with KVIB and Director of Industries of respective states (for DICs) will give advertisements locally through print & electronic media inviting applications at periodical intervals along with project proposals from prospective beneficiaries. The scheme will also be advertised /publicized through the Panchayati Raj Institutions which will also assist in identification of beneficiaries.
- Q : Can you tell me on what basis should I choose the sponsoring agency (KVIC/KVIB/DIC)?
Reply: You need not worry about implementing agencies. Online submission of applications for loans under PMEGP is mandatory and no manual applications are allowed w.e.f 01.05.2016
- Q: DLTFC has sanctioned loan on the basis of my loan application. However, bank is not ready to sanction the approved loan. What shall I do now?
Reply: The final sanction of project and release of loan is done at the level of concerned Bank. The Bank will appraise the projects and take their own credit decision on the basis of viability of each project. Bank has the discretion either to sanction/decline a loan. In case bank is declining your application, you may demand the bank to give the reason for declining in writing. If you feel the reason given by the bank is not a valid reason, you may complain the matter to the higher authorities of the bank, ministry, CEO of KVIC, CMDs of the concerned banks, RBI, etc.
- Q: Bank is insisting for collateral security for the loan under PMEGP. Is collateral security compulsory for PMEGP loan?
Reply: Banks may ask security for the loan sanctioned by them. However, no collateral security will be insisted upon by Banks in line with the guidelines of RBI for projects involving loan up to Rs.10 lakh.
- Q: I have received a message from DLTFC that my loan application has been preapproved. What is the next process?
Reply: The final sanction of project and release of loan is done at the level of concerned Bank. The Bank will appraise the projects and take their own credit decision on the basis of viability of each project on receipt of preapproved credit proposal from DLTFC. If the loan is sanctioned by the bank it would claim subsidy amount from KVIC. The online claim form will be automatically checked by KVIC for the fulfillment of two conditions (i) the date of release of first installment is prior to the date of filing of Margin Money subsidy claim and (ii) the amount of first installment released is more than the Margin Money subsidy amount claimed. KVIC will validate the subsidy claim and upload on to the Nodal Bank portal within 3 working days. Nodal Bank will transfer the Margin Money subsidy claim amount validated by KVIC to the respective financing bank branch within 24 hours of the receipt of validation.
- Q: How DLTFC appraises the loan application?
Reply: DLTFC will appraise the applications on same methodology as followed by Banks for approval of loan.
- Q: My proposed unit will be in rural area. How will I get population certificate?
Reply: The population records of rural areas are available with the revenue departments of the State/Union Territory. You may contact revenue department of the jurisdiction where your proposed unit will be set up. You may also check up at Panchayat/Taluk office whether they have the record.
- Q: As a banker we have to finance Rs. 20 Lakhs in Pmegp scheme. Please tell me how much amount worth of collateral we have to ask?
Reply: The value of the collateral security is insisted usually based upon the type of security. In case of land and building the market value should be more than 25% to 50% of loan value, considering the forced sale value of the property which will be less than the market value. Further there is an element of accumulated interest charged on loan account which has also to be recovered by the bank.
- Q: I need a loan of Rs.25 lakhs. The bank is asking for security for the loan. I’m living in a rented house and don’t have any assets to offer as collateral security. How I will get the loan?
Reply: Banks do not insist for collateral security for loans up to Rs.10 lakh as per RBI guidelines. Since you need loan of Rs.25 lakhs and you don’t have any security to offer, you may request the bank to consider CGTMSE guarantee for the loan to be released to you. CGTSME guarantee is available for the project beyond Rs.5.00 lakhs and upto Rs.25.00 lakhs. In case bank accepts CGTMSE guarantee you need not provide either any security or third party guarantee. However, you will have to pay guarantee fee for the guarantee offered by CGTSME.
- Q: Whether the bank will immediately adjust the margin money (subsidy) received from KVIC to term loan account so that borrower can repay reduced loan amount?
Reply: The margin money (subsidy) received by the bank will kept in special term Deposit account for a period of three years at branch level in the name of the borrower. No interest will be paid on the deposit and no interest will be charged on loan disbursed to the corresponding amount of the deposit. The deposit amount will be returned to the borrower after 3 years if the loan is promptly repaid otherwise same will be adjusted to the loan outstanding.
- Q: I have applied for PMEGP loan through a finance company. The agent has sent me the approval of loan in PMEGP letter head. Now he is demanding deposit of money equivalent to my share of contribution to the project and three EMIs. Can I deposit the money with him?
Reply: I am not sure whether anybody can apply for PMEGP loan through middlemen. As per my knowledge you have to apply for loan online directly to KVIC on their portal. The loan will be approved by DLTFC and is finally sanctioned by the bank under their terms and conditions. Any money to be deposited towards your contribution same shall be deposited in your bank account in the branch where you are availing loan. So be careful while dealing with third parties.
- Q: What will be the interest rate of pmegp for girls?
Reply: Normal rate of interest is charged by banks to PMEGP loans as applicable to MSME loans. No special concession on interest provided to women beneficiaries.
- Q: Can I get loan under PMEGP schemes. I have done the all Poultry farming trainings. Sir I am eligible or not for this PMEGP schemes?
Reply: The activities like Dairy, sheep/goat rearing, piggery, poultry, etc. are not eligible for PMEGP loans. You may try with NABARD who extend loan support for livestock /animal husbandry development activities.
15. I have applied for a loan of Rs.25 lakhs but but I am sactioned loan of only Rs.10 lakh. How can they reduce my requirement?
Reply: The amount of bank credit will be on the basis ofthe total cost of the project (i.e Cost of equipment plus requirement of one cycle of working capital) less owner’s contribution to the project.
Related article: “Bank finance under PMEGP scheme”
Disclaimer: This article is only for general information. The scheme rules/guidelines may be changed by the Government from time to time. The clarifications or interpretations if any available from DIC, KVIC, KVIB are final. The author of this article is not responsible for the mistakes, errors, ambiguity, inconsistency, discrepancy, doubts or quality of information provided in this article.