PMEGP subsidy: how much you get by category and area, and when it is paid

PMEGP subsidy rates and your own contribution

PMEGP pays a margin-money subsidy. Margin money is the government's share of the project cost. It is a grant, and you do not repay it. The rate depends on your category and on whether the unit is in a rural or urban area (PIB press release, Ministry of MSME annual report 2025-26).

Special category covers SC, ST, OBC, women, transgender applicants, persons with disabilities, applicants in the North Eastern Region, and applicants from aspirational and border districts. The guideline copies also name ex-servicemen, minorities and hill and border areas (PIB press release, PMEGP guidelines compendium). Two sources list the categories slightly differently, and the Ministry's Annual Report 2025-26 adds aspirational district and transgender applicants (Ministry of MSME annual report 2025-26). Ask the implementing agency which category you fall in before you apply.

The bank finances the rest of the project cost: 90% for general applicants and 95% for special categories (PMEGP guidelines compendium).

Rural or urban: which rate applies

Areas under a Panchayati Raj institution count as rural. Areas under a municipality count as urban (PIB press release). The category of the place where the unit is set up decides the rate.

Maximum project cost

A bank may lend more than this, but the subsidy is calculated only up to the cap (PIB press release). Do not inflate the project cost to get a bigger subsidy. The guidelines say exaggeration of cost for that purpose should not be allowed (PMEGP guidelines compendium). Land cost is not part of the project cost (PMEGP portal).

A worked example

This is an illustration with round numbers. It is not an offer.

A general-category applicant sets up a manufacturing unit in an urban area. The project cost is ₹10,00,000.

The subsidy is not on top of the loan. The bank sanctions the loan, and the margin money is credited to the loan account later (PMEGP guidelines, PMEGP guidelines compendium). Here is how it works:

1. The bank releases the loan after your own contribution and EDP certificate are in place.
2. The ₹1,50,000 margin money is claimed and held in the bank as a three-year term deposit receipt in your name (PMEGP guidelines compendium).
3. No interest is paid on that deposit, and none is charged on the matching ₹1,50,000 of the loan (PMEGP guidelines compendium).
4. After three years the subsidy is credited to your loan account, and the outstanding loan falls by that amount (PMEGP guidelines).

So your cash need at the start is your own contribution, not the subsidy. A woman applicant in the same urban area would be in the special category, and would pay 5% and get 25% (PIB press release, PMEGP guidelines compendium).

When the PMEGP subsidy is paid and how the claim works

The claim goes through the bank, not through you (PMEGP guidelines compendium).

• The bank releases the first instalment of the loan and claims the margin money online.
• KVIC validates the claim and uploads it to the nodal bank's portal within 3 working days.
• The nodal bank transfers it to your financing branch within 24 hours (PMEGP guidelines compendium).

Before the margin money can be adjusted, the unit must be registered on Udyam and physically verified (PMEGP portal). The three-year lock-in counts from the date of the first disbursement of the loan (PMEGP guidelines). A second loan needs the first subsidy to be successfully adjusted after the lock-in (PMEGP guidelines compendium).

To follow your application, use the applicant login on the portal pmegp.msme.gov.in. The portal's user manual explains the screens.

The subsidy is one-time

The margin money is one-time assistance. It is not available for a later rise in your credit limit or for expansion or modernisation of the project (PMEGP guidelines compendium). A project financed jointly by two lenders is not eligible for the subsidy (PMEGP guidelines compendium). You also undertake to refund the subsidy if KVIC, the state board or the district centre objects in writing (PMEGP guidelines compendium).

Subsidy and the bank loan together

The subsidy is only one part of the money. The bank loan is still the larger part, and the bank decides it after its own appraisal of the project (PMEGP guidelines compendium). Plan for the full project cost, your own share and the interest on the loan, and treat the subsidy as a later reduction in what you owe (PMEGP guidelines).

Second loan: the subsidy for upgrading

Units that already took a PMEGP, REGP or Mudra loan, repaid it on time and made profit for three years can get a second loan with a subsidy (PMEGP portal, Ministry of MSME annual report 2025-26).

Common mistakes that cost you the subsidy

• Skipping Udyam registration. The margin money cannot be adjusted until the unit is registered and physically verified (PMEGP portal).
• Using two lenders. A project financed jointly by two lenders is not eligible for the subsidy (PMEGP guidelines compendium).
• Adding land to the project cost. Land cost is not allowed (PMEGP portal).
• Inflating the cost. The guidelines say exaggerated cost should not be allowed (PMEGP guidelines compendium).
• Expecting cash in hand. The subsidy is held as a deposit for three years before it reduces the loan (PMEGP guidelines compendium, PMEGP guidelines).

Who does not get the subsidy

The subsidy does not go to existing units, to units that already took a government subsidy, to projects without capital expenditure, or to land cost (PMEGP portal). The eligibility guide has the full test.

Your next step

The subsidy helps only after a bank agrees to lend. Run the free loan readiness check to see how a lender may read your plan. Then read the PMEGP guide, the project report guide and the Mudra subsidy guide, which explains why Mudra has none. Women entrepreneurs can also read business loans for women.