PMEGP Boosts Small Entrepreneurs as Majority of Loans Go to Projects Under ₹10 Lakh

In line with Reserve Bank of India (RBI) guidelines, banks are not permitted to demand collateral security for PMEGP projects involving loans of up to ₹10 lakh.

The Prime Minister’s Employment Generation Programme (PMEGP) continues to play a critical role in supporting small entrepreneurs, with a majority of assisted projects over the past five years involving low-cost micro-enterprises, the government has told Parliament.

In a written reply to the Rajya Sabha, Minister of State for Micro, Small and Medium Enterprises Sushri Shobha Karandlaje said that during the period FY 2020–21 to FY 2024–25, around 63% of manufacturing units and 93% of service sector units supported under PMEGP had project costs of up to ₹10 lakh.

PMEGP is a central sector scheme designed to promote self-employment by assisting prospective beneficiaries in setting up new micro-enterprises, largely through small, bank-financed loans supported by government subsidy.

To further ease access to credit and encourage smaller projects, the Ministry of MSME has implemented several facilitative measures. Priority is being given to applications with project costs below ₹10 lakh, ensuring greater outreach to first-time and grassroots entrepreneurs.

In line with Reserve Bank of India (RBI) guidelines, banks are not permitted to demand collateral security for PMEGP projects involving loans of up to ₹10 lakh. The Ministry has reiterated strict compliance with this provision to all major banks to prevent undue hardship for beneficiaries.

The government has also relaxed eligibility norms for small projects. There is no educational qualification requirement for setting up manufacturing projects costing up to ₹10 lakh and service sector projects up to ₹5 lakh, lowering entry barriers for aspiring entrepreneurs.

To strengthen support mechanisms, the Ministry operates the CHAMPIONS portal (Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength). The platform provides grievance redressal, handholding support, advisory services, and direct connectivity with officials from central and state governments, banks and other agencies, including for PMEGP-related issues.

On interest rates, the Minister noted that the RBI has deregulated bank lending rates, meaning PMEGP loan interest rates are determined by individual banks based on their credit and underwriting policies. However, RBI has issued clear directions to ensure transparency, fairness and full disclosure of loan terms, enabling beneficiaries to make informed choices and preventing arbitrary recovery practices. Banks have also been instructed to accord priority to PMEGP projects while sanctioning loans.

The government said these measures collectively aim to strengthen entrepreneurship, generate employment at the grassroots level, and ensure that access to finance under PMEGP remains inclusive, transparent and borrower-friendly.