Bank Finance Process - PMEGP:

1. The Bank will sanction 90% of the project cost in case of General Category of
    beneficiary/institution and 95% in case of special category of the beneficiary/institution,
    and disburse full amount suitably for setting up of the project.

2. Bank will finance Capital Expenditure in the form of Term Loan and Working
    Capital in the form of cash credit. Project can also be financed by the Bank in the form
    of Composite Loan consisting of Capital Expenditure and Working Capital.

3. Maximum project cost under PMEGP is Rs. 25 lakh, which include Term loan for 

    Capital Expenditure and Working Capital. For manufacturing units, working capital 

    component should not be more than 40% of the project cost and for units under 

    service/trading sector, the working capital shall not be more than 60% of the project cost. However,         for manufacturing units, the project cost may include maximum capital 

    expenditure upto Rs.25 lakh. In such cases, the working capital over and above Rs.25 

    lakh will not be covered under subsidy. This is in line with the definition of Micro units 

    under MSMEs Development Act, 2006. A Bill for amending the definition of MSMEs is 

    before the Parliament. The guidelines of PMEGP will be changed in accordance with 

    the amended provisions in the definition of MSMEs in the Act as and when approved by 

    the Parliament.

4. Though Banks will claim Margin Money (subsidy) on the basis of projections of 

    Capital Expenditure in the project report and sanction thereof, Margin Money (subsidy) 

    on the actual availment of Capital Expenditure only will be retained and excess, if any, 

    will be refunded to KVIC, immediately after the project is ready for commencement of 

    production. 

5. Working Capital component should be utilized in such a way that at one point of 

    stage it touches 100% limit of Cash Credit within three years of lock in period of Margin 

    Money and not less than 75% utilization of the sanctioned limit. If it does not touch aforesaid limit,        proportionate amount of the Margin Money (subsidy) is to be recovered by the Bank/Financial                 Institution and refunded to the KVIC at the end of the third year.