2nd Loan for Up-gradation of Existing PMEGP/REGP/MUDRA Units

What is the 2nd Loan for up-gradation of existing PMEGP/REGP/MUDRA units?

The 2nd Loan under the Prime Minister's Employment Generation Programme (PMEGP) is a second round of subsidised credit for an enterprise that has already been financed once: under PMEGP, the older Rural Employment Generation Programme (REGP), or MUDRA, and now wants to expand or modernise. The Ministry of Micro, Small and Medium Enterprises added this provision so that units performing well on turnover, profit and repayment are not left without a growth route once their first PMEGP loan closes.

According to the Ministry of MSME's PMEGP guidelines, the provision was made for "sanctioning a 2nd loan with subsidy for upgrading the existing units, which are performing well in terms of turnover, profit making and loan repayment".

Who runs it

PMEGP is implemented by the Khadi and Village Industries Commission (KVIC) at the national level. At state and district level the implementing agencies are state offices of KVIC, State Khadi and Village Industries Boards (KVIBs), the Coir Board, and District Industries Centres (DICs), with the actual credit coming from participating banks.

What "upgradation" means here

The second loan is meant for capital investment that raises capacity or quality; new machinery, modernisation of the production line, additional plant, or expansion of the service facility: not for working capital alone or for starting an unrelated new business.

Who is eligible for the PMEGP 2nd loan?

You can apply if:

• Your unit was financed under PMEGP, REGP or MUDRA for its first loan.
• The margin money subsidy on the first loan has been successfully adjusted on completion of the three-year lock-in period.
• The first loan was repaid in the stipulated time.
• The unit is profit making with good turnover and has potential for further growth in turnover and profit. The unit should have been making a profit for the last three years, with FY 2020-21 and FY 2021-22 exempted because of COVID.
• The unit is registered on the Udyam portal.

You cannot apply if:

• Your unit never took a first loan under PMEGP, REGP or MUDRA. This is not an entry-level scheme, a new entrepreneur should apply for a first PMEGP loan instead.
• Your first loan is still outstanding, or was not repaid within the stipulated period.
• The margin money subsidy on the first loan has not yet been adjusted after the lock-in period.
• The unit is loss making or has no demonstrable growth potential.
• You want subsidy on a project larger than Rs 1 crore in manufacturing or Rs 25 lakh in services. You can still borrow the balance, but without any government subsidy on that portion.

What documents are required for the PMEGP 2nd loan?

How to apply for the PMEGP 2nd loan online

1. Open the PMEGP e-portal and select the option for the 2nd loan for existing units, rather than the first-loan application form.
2. Register with your Aadhaar, PAN and Udyam Registration number, and enter the details of your existing unit and its first PMEGP, REGP or MUDRA loan.
3. Fill in the upgradation project details: proposed machinery or expansion, project cost, and the additional employment it will generate.
4. Upload the supporting documents: the last three years' accounts, the repayment proof for the first loan, the margin money adjustment record and your project report.
5. Choose the financing bank: either the bank that gave your first loan or another bank willing to extend the second loan, and submit the application.
6. Your application is scrutinised by the implementing agency (KVIC, KVIB or DIC) and forwarded to the bank.
7. Attend the bank appraisal, deposit your 10% own contribution, and receive sanction and disbursement.
8. The bank claims the margin money subsidy, which is kept as a back-ended subsidy and adjusted against the loan after the lock-in period.

How much benefit does the PMEGP 2nd loan provide?

Note that the subsidy percentages for the second loan are flat; unlike the first PMEGP loan, there is no separate higher rate for special categories or for rural areas. Where your total project cost runs above Rs 1 crore in manufacturing or Rs 25 lakh in services, you can still raise the balance from the bank, but no government subsidy attaches to that extra amount.

The margin money is a back-ended subsidy. It is credited to your loan account by the bank and kept in a term deposit or subsidy reserve account, and is adjusted only after the lock-in period is complete and the unit has performed as promised.

How is the PMEGP 2nd loan different from the first PMEGP loan?

• Eligibility is a track record, not a profile. The first PMEGP loan is open to any individual above 18 years starting a new unit; the second loan is open only to an existing unit with a clean repayment and profit record.
• The project ceiling is higher. The second loan supports projects up to Rs 1 crore in manufacturing, against a lower ceiling for a first PMEGP project.
• The subsidy rate is lower and flat. The first loan carries higher margin money rates that vary by category and by rural or urban location; the second loan is 15%, or 20% in NER and hill states, for everyone.
• Own contribution is 10% for the second loan.
• The purpose is fixed. The second loan is for upgradation of the existing unit, not for a fresh unrelated venture.

Common reasons a PMEGP 2nd loan application is rejected

• Margin money on the first loan not yet adjusted, the most common reason, since adjustment happens only after the three-year lock-in.
• First loan not repaid within the stipulated time, or still running.
• Losses in the accounts for the years being examined, outside the exempted COVID years.
• No Udyam registration for the unit.
• Weak project report that does not show how the upgradation will raise turnover, profit or employment.
• Bank appraisal failure, the implementing agency's clearance does not bind the bank, which makes its own credit decision.

Help and grievance redressal for the PMEGP 2nd loan

• PMEGP technical support: 022-69168907
• PMEGP operational support: 022-26712087
• Email: support-pmegp@msme.gov.in
• State and zonal helpdesks are listed on the PMEGP portal under the Help Desk section, grouped into Central, East, North, North East, South and West zones.

Applying on the PMEGP e-portal is free. No agent can get your second loan sanctioned for a fee. The implementing agency scrutinises the file and the bank takes the credit decision.