Bank Credit Decisions Key to MSME Subsidy Flow: Govt Explains Pending Cases Under PMEGP

The Government of India has clarified that the flow of subsidies under the Prime Minister’s Employment Generation Programme (PMEGP) is intrinsically linked to bank credit decisions, and that pending cases are largely a result of project viability assessments undertaken by lending institutions.

Responding to a Lok Sabha unstarred question, the Ministry of Micro, Small and MediumEnterprises (MSME) provided detailed data on beneficiaries, applications, and employment generation in Uttar Pradesh, with specific reference to Lalganj LokSabha Constituency and Azamgarh district.

According to the Ministry, margin money subsidiemsms under PMEGP have supported thousands of micro entrepreneurs in Uttar Pradesh over the past two years. In FY 2023‑24, 11,689 beneficiaries were assisted across the state, including 8 in Lalganj and 494 in Azamgarh.

In FY 2024‑25, the numbers stood at 5,518 for Uttar Pradesh, 4 for Lalganj, and 259 for Azamgarh. These subsidies are designed to help entrepreneurs set up micro enterprises, thereby generating employment opportunities at the grassroots level.

The data also reveals a significant gap between applications received and enterprises assisted. In FY 2023‑24, Uttar Pradesh saw 48,885 applications under PMEGP, but only 11,689 enterprises were assisted. Lalganj received 39 applications, of which 8 were supported, while Azamgarh received 1,624 applications, with 494 assisted.

In FY 2024‑25, 20,514 applications were filed in Uttar Pradesh, but only 5,518 enterprises were assisted. Lalganj received 18 applications, with 4 supported, and Azamgarh saw 448 applications, with 259 assisted.

Over the last five years, PMEGP has facilitated the creation of microenterprises in these regions. In Lalganj, 40 entrepreneurs were assisted with margin money subsidies, generating an estimated 320 jobs. In Azamgarh, 1,620 entrepreneurs were supported, creating around 1,620 jobs. Nationally, the programme has generated substantial employment, with 7,12,944 jobs in FY 2023‑24 and 4,77,664 jobs in FY 2024‑25.

The Ministry highlighted that PMEGP is a credit‑linked central sector scheme. This means that while the government provides financial assistance in the form of margin money subsidies, the final sanction and release of loans rests with banks. Applications are first scrutinised by implementing agencies before being forwarded to banks.

Lending institutions then appraise the projects and take independent credit decisions based on viability. Only those projects sanctioned by banks are eligible for subsidies, subject to the availability of funds and adherence to prescribed guidelines.

This framework explains why many applications remain pending or are not converted into assisted enterprises. The government underscored that it does not directly deny subsidies; rather, the bottleneck lies in the credit appraisal process. Banks must ensure that projects are financially viable before extending loans, and only then can margin money subsidies be released.

The reply also highlighted that PMEGP does not set employment generation targets in advance, since outcomes depend on the number of viable projects sanctioned by banks.

Instead, employment figures are estimated based on the number of enterprises assisted. This approach reflects the scheme’s dependence on credit flow and the entrepreneurial ecosystem, rather than predetermined quotas.

Going forward, the government’s explanation suggests that improving subsidy flow will require closer coordination between implementing agencies, banks, and entrepreneurs. Streamlining credit appraisal processes, enhancing financial literacy among applicants, and ensuring timely fund availability could help bridge the gap between demand and delivery.

As MSMEsremain central to India’s employment and growth strategy, addressing these bottlenecks will be crucial to maximising the impact of PMEGP.

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