PMEGP Loan and Subsidy in Bihar: Eligibility, Limits and How to Apply

If you want to start a small factory, workshop or service unit in Bihar and don't have much capital, the PMEGP loan is one of the strongest options available. The Prime Minister's Employment Generation Programme gives you a bank loan plus a government subsidy of 15% to 35% of the project cost. This guide explains eligibility, limits, subsidy rates, how to apply on the KVIC portal and the mistakes that get Bihar applications rejected.

What is PMEGP and who runs it?

PMEGP is a central government credit-linked subsidy scheme for new micro enterprises. The Khadi and Village Industries Commission (KVIC) is the national nodal agency. In Bihar, applications are processed through three implementing agencies:

• KVIC state office (Patna)
• Bihar State Khadi and Village Industries Board (KVIB)
• District Industries Centre (DIC) in every district, for example DIC Sasaram for Rohtas, DIC Gaya or DIC Muzaffarpur

You don't have to visit all three. You choose one agency and one bank branch while filling the online form, and the application moves between them digitally.

The current guidelines were approved for the 2021-22 to 2025-26 cycle. Before you apply, check the official KVIC PMEGP portal to confirm that applications are open and whether any rule has been revised.

Who is eligible for a PMEGP loan?

• Any individual aged 18 years or above.
• For projects above ₹10 lakh in manufacturing or ₹5 lakh in service/business, you must have passed at least Class 8.
• Only new projects qualify. An existing unit, or one that has already taken a government subsidy under another central or state scheme, is not eligible.
• Only one person per family (self and spouse) can take PMEGP assistance.
• Self-help groups, registered societies, production cooperatives and charitable trusts can also apply, provided they haven't taken benefits under another scheme for the same project.

There is no income ceiling for the applicant.

PMEGP project cost limits and what counts in the cost

• Manufacturing: maximum project cost of ₹50 lakh
• Service or business: maximum project cost of ₹20 lakh

The project cost includes machinery, equipment, shed or civil work, furniture and one cycle of working capital. Land cost is excluded. Working capital can be up to 40% of project cost for manufacturing and up to 60% for service/trading-linked units.

Pure trading is not supported. You can't take PMEGP to open a plain kirana or garments shop. A retail outlet is allowed only if it sells what your own unit makes or processes. For a trading shop, look at a Mudra loan instead.

Some activities are on the negative list, including meat processing and sale, intoxicants, very thin polythene bags, and crop cultivation. Dairy, poultry, fisheries and value-addition units are allowed.

PMEGP subsidy rates and your own contribution

The subsidy is called margin money. Your own contribution and the subsidy depend on your category and whether the unit is in a rural or urban area.

• General category: own contribution 10% of project cost; subsidy 15% (urban) or 25% (rural)
• Special category (SC, ST, OBC, minorities, women, ex-servicemen, transgender, differently-abled, NER, aspirational districts, hill and border areas): own contribution 5%; subsidy 25% (urban) or 35% (rural)

The bank finances everything except your own contribution. The subsidy then sits in a term deposit for three years. The good news: no interest is charged on the part of the loan equal to the subsidy amount. After three years, if the unit is running and has passed physical verification, the subsidy is adjusted against your loan.

"Rural" means an area recorded as a village in revenue records or under a Panchayati Raj institution. A unit in a village outside Dehri or Bikramganj counts as rural; a unit inside Patna Municipal Corporation limits counts as urban.

Worked example: a woman entrepreneur near Sasaram

Sunita, from a village in Rohtas, wants to start a spice grinding and packing unit.

• Machinery (grinder, pulveriser, packing machine): ₹8,50,000
• Shed and electrical work: ₹2,50,000
• Working capital (raw spices, pouches for first cycle): ₹4,00,000
• Total project cost: ₹15,00,000

She is a woman in a rural area, so she is in the special category.

• Her own contribution (5%): ₹75,000
• Bank loan (95%): ₹14,25,000
• PMEGP subsidy (35%): ₹5,25,000, kept as a three-year term deposit

In practice she services interest only on about ₹9 lakh, not ₹14.25 lakh. If the unit is running after three years and passes verification, the ₹5.25 lakh is adjusted and her loan is reduced by that amount. Because the project is above ₹10 lakh in manufacturing, she needs a Class 8 pass certificate, and because it is above ₹5 lakh, her EDP training will be at least 10 days.

Documents needed for PMEGP in Bihar

• Aadhaar card (mandatory) and PAN card
• Passport-size photographs
• Address proof and, for rural subsidy, proof that the unit site is in a rural area
• Caste certificate (SC/ST/OBC) or other special-category proof, if claimed
• Education certificate (Class 8 or higher, where required)
• Project report with cost break-up, machinery quotations and projected profit
• Rent agreement or ownership papers for the unit site
• Bank account details

The portal has model project profiles, but a report that fits your real costs works far better. See our guide on how to write a business plan for a bank loan.

How to apply for PMEGP online: step by step

1. Go to the PMEGP e-portal on the KVIC website and choose the application form for individuals (or for non-individual applicants).
2. Enter Aadhaar, personal details, category, education and the unit location. Select rural or urban carefully.
3. Choose your implementing agency (KVIC, KVIB or DIC) and financing bank branch. Pick a branch close to your unit site.
4. Enter the activity, project cost break-up and upload your project report and documents.
5. Submit and note your application ID. You can track status on the portal.
6. The agency scrutinises the application and may call you for a short interview with the district task force. It is then forwarded to the bank.
7. The bank appraises the project, checks your credit history and visits the site. If approved, it sanctions the loan.
8. You complete EDP (Entrepreneurship Development Programme) training, online or offline. It is not required for projects up to ₹2 lakh, is at least 5 days up to ₹5 lakh, and at least 10 days above that.
9. The bank releases the first instalment and claims the margin money, which is kept as a term deposit.
10. Once the unit starts, get your free Udyam registration and keep all bills and stock records.

The guidelines set target timelines (agency scrutiny within days, bank decisions within about 30 days), but in reality it often takes two to four months. Visit the branch politely and regularly; don't depend only on the portal.

Why PMEGP applications get rejected

• Pure trading activity entered as "business" (for example a plain grocery shop)
• A weak or copied project report with unrealistic sales figures
• Poor credit history: past defaults, settled loans or overdue credit card dues. Read our CIBIL score guide for business owners
• Wrong rural/urban selection or unit site outside the bank's service area
• Missing quotations, rent agreement or category certificates
• Applicant or spouse has already taken a subsidy for a unit
• Not responding when the bank calls for documents or a site visit

If a bank rejects your file, ask for the reason in writing. The agency can sometimes forward it to another bank.

How do collateral and CGTMSE work with PMEGP?

The scheme says banks should not ask for collateral for loans up to ₹10 lakh, in line with RBI instructions. For bigger loans, banks usually secure the loan with the machinery and stock (primary security) and may cover it under the Credit Guarantee Fund Trust. Our guide to collateral-free loans under CGTMSE explains how that cover works.

After a PMEGP unit runs well, an upgradation (second) loan is possible: up to ₹1 crore for manufacturing and ₹25 lakh for service, with a 15% subsidy (20% in NER and hill states), once the first loan is repaid and the first subsidy adjusted.

PMEGP checklist before you apply

• Activity is manufacturing or service, not pure trading, and not on the negative list
• Project cost within ₹50 lakh / ₹20 lakh, land excluded
• Own contribution (5% or 10%) arranged in your bank account
• Machinery quotations from real suppliers (Patna, Gaya or Varanasi suppliers are common for Rohtas units)
• Rural/urban status of the site confirmed
• CIBIL report checked and old dues cleared
• Realistic project report with monthly sales and costs

Also compare other options. Bihar's own Mukhyamantri Udyami Yojana may suit some applicants better. Read the Hindi version of this guide: PMEGP लोन कैसे लें.

Next steps

Pick your activity, get two or three machinery quotations, draft a simple project report and apply on the KVIC portal. Talk to the branch manager early. You can find banks, CSC centres and finance consultants on our banking and financial services page for Rohtas. Once your unit is running, list your business free on Bihar Directory so customers across Bihar can find, call and WhatsApp you.

This is general information, not legal or financial advice. Confirm current PMEGP rules with KVIC, your District Industries Centre or your bank before applying.