Centre asks banks to look at higher rejection rate of PMEGP applications
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Banks in Tamil Nadu have been asked to look at the issue of high rate of rejection of applications under the Prime Minister’s Employment Generation Programme (PMEGP), a Central sector scheme aimed at creation of jobs through establishment of micro enterprises in rural as well as urban areas.

The Department of Financial Services (DFS), under the Union Ministry of Finance, has written to the State Level Bankers Committee (SLBC), Tamil Nadu, in this regard. In its letter, the department pointed out that the Parliamentary Standing Committee on Industry visited Kumarakom and Chennai in November last year.

During the visit, the committee had raised concerns about the high rate of rejection of applications under the PMEGP by the banks, particularly on the grounds of service area, time limit for submitting documents among others.

It noted that PMEGP is a flagship scheme of the Ministry of Micro, Small and Medium Enterprises (MSME) and provides self-employment to rural and urban youth through the establishment of micro enterprises in the non-farm sector.

Under the scheme, the maximum cost of a project admissible under the manufacturing sector is ₹25 lakh and under business/services sector it is ₹10 lakh.

The beneficiaries from the general category have to contribute 10% of the project cost while those from the special category — SC / ST / OBC /Minorities/Women, Hill and Border areas etc. have to contribute 5% of the project cost.

For the general category, the government provides subsidies of 15% in urban areas and 25% in rural areas. For the special category, the subsidy provided is 25% in urban areas and 35% in rural areas.

The balance amount of the project cost will be provided by banks as term loan.

The scheme is implemented by the Khadi and Village Industries Commission (KVIC) at the national level. At the State level, the scheme is implemented through State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and the District Industries Centres (DICs) and banks.

The subsidy is routed by KVIC through the identified banks to the beneficiaries/entrepreneurs in their bank accounts.

As per the data provided by KVIC, Chennai, the number of applications rejected by banks stood at 13,154, which is nearly 45% of the total 29,267 applications forwarded to various banks as on February 16, 2023.

Banks have disbursed a subsidy of ₹136.72 crore under the scheme in 2022-23 (till February 16), which is 81% of the target of ₹169.6 crore set for the year, as per data shared by KVIC with SLBC.

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