Lok Sabha Question No. 239 (STARRED), answered on 2022-03-17
Subject: Loans under PMEGP
Ministry: MICRO,SMALL AND MEDIUM ENTERPRISES
Asked by: Anubhav Mohanty

## GOVERNMENT OF INDIA MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES

## LOK SABHA

## STARRED QUESTION NO. *239

TO BE ANSWERED ON 17.03.2022

## LOANS UNDER PMEGP

## *239.           SHRI ANUBHAV MOHANTY:

Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:

- (a) whether the individuals seeking loan under the Prime Minister's Employment Generation Programme (PMEGP) are being asked for  hypothecation and collateral and if so, the details thereof and the reasons therefor;
- (b) whether  such  a  move  would  cause  impediments  in  the  success  of  the programme; and

(c) if  so,  whether  the  Government  has  any  proposal  to  do  away  with  the conditions of hypothecation and collateral for seeking loan under the scheme and if so, the details thereof?

## ANSWER

## MINISTER OF MICRO, SMALL AND MEDIUM ENTERPRISES (SHRI NARAYAN RANE)

(a) to (c): A statement is laid on the table of the House.

## STATEMENT REFERRED TO IN REPLY TO PARTS (a) to (c) OF THE LOK SABHA STARRED QUESTION No.*239 FOR ANSWER ON 17.03.2022

(a) to (c): Prime  Minister's  Employment  Generation  Programme  (PMEGP)  is  a bank appraised and financed credit linked subsidy programme, being implemented by  the  Ministry  of  MSME  for  generation  of  employment  opportunities  through establishment of non-farm based micro enterprises in rural as well as urban areas of the country.

The scheme guidelines provide that the bank will appraise the projects and take their own credit decision, including hypothecation, on the basis of viability of each project.

As per RBI instructions of 2010, banks are mandated not to ask for collateral security  in  case  of  loans  up  to  Rs.10  lakh  extended  to  units  in  the  MSE  sector. Accordingly, PMEGP guidelines provide that no collateral security shall be insisted upon by Banks in line with the guidelines of RBI for projects involving loan up to Rs.10 lakh.

Banks  may  ask  for  collateral  for  loans  above  Rs.10  lakh.  This  causes  no impediment in the success of the PMEGP scheme as Banks are sanctioning more projects than the target. During the FY 2020-21, against the target of setting up of 78617 micro-units, the Banks had sanctioned 95805 projects. Similarly, during the current FY 2021-22, against the target of setting up of 94181 new micro enterprises, the banks have already sanctioned 1,00,756 projects  till 10.03.2022.

Further,  to  facilitate  PMEGP  entrepreneurs,  collateral  free  credit  facility (term  loan  and/or  working  capital)  is  available  under  Credit  Guarantee  Trust  for Micro and Small Enterprises (CGTMSE) scheme of the Ministry.

CGTMSE has been set up to facilitate flow of credit to the MSE sector by reassuring  the  lender  that  if  a  MSE  unit,  which  has  availed  collateral  free  credit facilities, fails to discharge its liabilities to the lender, the Trust would make good the loss incurred by the lender, as per applicable conditions.

The guarantee cover under CGTMSE extends from 50% to 85% of the credit with a guarantee fee of 0.5 to 1.5% for a loan up to Rs. 2 crore.

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