| Quick answer: PMEGP subsidy ranges from 15% to 35% of the eligible project cost. It is not paid as cash to the applicant. It is kept with the bank during the three-year lock-in period and may later be adjusted against the loan after successful verification and compliance. |
The exact PMEGP subsidy rate depends on the applicant’s category, the location of the proposed unit and the eligible project cost.
General-category applicants must contribute 10% of the project cost from their own funds. Special-category applicants must contribute 5%. The bank generally finances the remaining eligible amount. The subsidy is claimed separately and adjusted later, subject to PMEGP rules.
You should therefore not treat PMEGP subsidy as money that will be immediately available to buy machinery or meet daily business expenses.
Subsidy table
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Who comes under special category?
- SC and ST applicants
- OBC applicants
- Women entrepreneurs
- Minority applicants
- Ex-servicemen
- Transgender persons
- Persons with disabilities
- Applicants from the North-East Region and other specified priority areas
Example 1: ₹10 lakh urban service project
A general-category applicant contributes ₹1 lakh. The indicative subsidy is ₹1.5 lakh, and the remaining eligible amount may be financed by the bank. The exact sanction can differ after appraisal and adjustment of ineligible costs.
Example 2: ₹20 lakh rural project by a woman
A woman applicant in a rural area may contribute ₹1 lakh and qualify for an indicative subsidy of ₹7 lakh. The balance eligible project cost may be financed by the bank.
Example 3: ₹50 lakh rural manufacturing project
A special-category applicant may contribute ₹2.5 lakh and qualify for an indicative subsidy of ₹17.5 lakh. The balance may be structured as bank finance, subject to project viability, eligible costs and sanction.
What margin money really means
Margin money is a back-ended subsidy. It is not available for withdrawal or unrelated spending. After the bank disburses the loan and claims the subsidy, the amount is held during the prescribed lock-in period. The unit must remain operational and complete the required verification and compliance before adjustment.
Interest treatment
The applicant does not receive interest on the locked subsidy amount. At the same time, the bank should not charge loan interest on the corresponding subsidy component during the lock-in period, in accordance with the scheme guidelines.
When is subsidy adjusted?
Adjustment normally follows the lock-in period, successful physical verification and confirmation that the unit was established and operated according to the sanctioned project. Udyam registration and other required records should be completed at the applicable stage.
What can affect the subsidy?
- Reduction of eligible project cost during bank appraisal.
- Ineligible land or unrelated expenditure included in the DPR.
- Failure to establish the unit.
- Incorrect category or rural-area claim.
- Negative physical verification.
- Diversion of funds or premature closure.
- Failure to meet scheme and sanction conditions.
Own contribution
Applicants should arrange their own contribution from a genuine, explainable source. The bank may ask for statements, fixed-deposit evidence, savings records or other proof. Applicants should avoid presenting another undisclosed loan as their contribution.
| Calculate before filing FortRisk automatically calculates the PMEGP subsidy, applicant contribution, bank finance and projected repayment as part of the project report. Create Your PMEGP Financial Plan |
FAQs
Is 35% subsidy available to everyone?
No. It generally applies to eligible special-category applicants in rural areas.
Can subsidy exceed the project-cost limit?
No subsidy is available beyond the eligible project-cost ceiling, even if the bank sanctions additional finance.
Is subsidy guaranteed after application?
No. It depends on eligibility, sanction, availability, establishment of the unit and compliance.
Can subsidy be used as the applicant’s contribution?
No. The applicant must arrange the prescribed own contribution separately.
What happens if the business closes early?
The subsidy may not be adjusted and recovery or other consequences may follow under the scheme and sanction terms.
Conclusion
The subsidy is valuable because it can reduce the effective amount ultimately repayable, but it should not be treated as immediate cash. Build the project around genuine costs and sustainable operations rather than maximising the subsidy percentage alone.
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