Getting a loan is usually a tedious process, even for salaried individuals. Several factors are taken into consideration: like your credit score, company history, and past pay slips while appraising a loan application.

If this is the case for salaried individuals, what do you do when you are unemployed and need a loan to start your venture? You might be in between jobs, or been out of a job recently and planning to start your own venture. What do you do in a situation like this? Let's discuss the options available.

The Government of India has been implementing the Prime Minister Rozgar Yojana scheme since the year 1993 (the period of 8th five-year plan) with a focus on creation and provision of sustainable self-employment options to educated but unemployed youth of the country. It relates to the setting up of the self-employment ventures in manufacturing, business, service or trade sector.

It was envisaged that 1 million youth in the country are provided gainful means of self-employment through this scheme. However, the progress has been much more since the time of inception of the program.

Eligibility Criteria

There are certain eligibility criteria that you must conform to if you wish to apply for this scheme. Over the years, there has been a lot of modifications in the eligibility criteria so that the scheme remains in tune with the requirements of the present day.

  • Any educated but unemployed youth can apply

  • You must be between the age group of 18- 35 years

  • 10 years relaxation is given for SC/STs, ex-servicemen, physically handicapped and women

  • In the case of the seven North Eastern States, the upper age limit has been relaxed, in general up to 40 years.  For the SCs/STs, ex-servicemen, physically handicapped and women the relaxation shall be up to the age of 45 years

  • The educational requirement which was Matric (pass or fail) has been relaxed to VIII grade pass

  • Neither the income of the beneficiary along with the spouse nor the income of parents of the beneficiaries shall exceed Rs. 40,000 p.a.

  • Should be a resident in the current place of residence for at least 3 years

Exclusion to the Scheme

  • Should not have defaulted on any loans/schemes availed in the past from nationalized banks/financial institutions or cooperative banks

  • Should not have benefitted under any other subsidy linked scheme of the Government

Project Cost

Depending upon the category of the project, upper limits have been set as below:

  • Under this scheme projects, up to Rs.1 lakh are allowed for ventures in the business sector

  • The limit is extended to Rs 2 lakhs for other activities

  • If you are applying jointly as a partnership along with two or three eligible partners, projects cost of up to Rs 10 lakh is also allowed

For the North Eastern region, special regulations for project cost are formed as follows:

  • Project costing up to Rs. 2 lakhs in other than business sectors will be eligible for assistance

  • No collateral will be Insisted for projects costing up to Rs. 1 lakh. Group financing up to Rs. 5 lakhs will be eligible.

 Activities Covered under Prime Minister’s Rozgar Yojana

All economically viable activities can be included under this scheme. Even activities related to agriculture and allied activities can be included. However, the scheme explicitly disallows direct agricultural operations like raising a crop or purchase of manure, etc.

For residents of the North Eastern areas, the following activities are also allowed among others:

  • Horticulture 

  • Piggery

  • Poultry

  • Fishing 

  • Small Tea Gardens, 

Subsidy and Margin Money

  • Under Prime Minister’s Rojgar Yojana, the subsidy granted will be limited to 15% of the project cost and is subject to a ceiling of Rs. 7,500 per entrepreneur.  

  • Margin money varying from 5% to 16.25% of the project cost is allowed to be demanded by the banks in order to make the total of the subsidy and the margin money equal to 20% of the project cost.

Under-relaxation for North Eastern regions:

  • The subsidy component of the scheme will be considered @ 15% with an upper ceiling of Rs. 15,000  

  • The margin money may be between 5% to 12.5% of the project cost in order to make the total of subsidy and margin contribution at 20% of the project cost

Collateral guarantee Required

  • Loans under this scheme need no collateral for project cost up to Rs.1 lakh. 

  • Further partnership projects are also not required to produce collaterals which is also be limited to an amount of Rs. 1.00 lakh per person participating in the project.

Repayment Schedule

The repayment tenure is meant to be easy and flexible. It generally ranges from 3 to 7 years after an initial moratorium as decided by the lender.

Rate of Interest

Regular rate of interest as decided by the banks/ other financial institutions from time to time will be applicable. This is also subject to change as per rules and regulations of the lenders. 

How Do You Apply For A Loan Under PMRY?

The Development Commissioner (Small-Scale Industries) who works under the aegis of Ministry of Small Scale, Rural and Agro, Industries Government of India is the apex body for this scheme. The implementation of the scheme is done by the respective Commissioner/ Director of Industries at the State level except the four metropolitan cities.

At the district level, the implementation agencies are District Industries Centre (DIC) which would be instrumental for the grounding of the units, while Small Industries Service Institute (SISI) Small at  Delhi, Kolkata, Mumbai, and Chennai will be implementing agencies of this scheme.

Steps for Loan Application

Preparation of Project Report based on Project Idea

  • The applicant should have in-depth idea of the proposed project. He/she could take assistance of the agencies like SISI or DIC. 

  • In addition, a detailed project report also needs to be prepared giving details of 

    • The feasibility of the product as supported by market survey

    • The demand and supply position of raw materials and other products, required if any

    • The  ease of availability of basic infrastructure facilities in addition with Government clearances. 

    • ​​​​​​The availability of know-how and technology required for the project 

Application for the loan

  • After finalizing the idea, the applicant has to submit application for the loan with other required documents at the DIC

  • The applications are examined and selected applicants are called for an interview. There are elaborate guidelines and help available with the SISI/ DIC which may be made use of by the applicants for bettering their chances of getting through the application and interview stage

Bank Clearance for the Project

  • After clearing through the interview, the applicant gets details about the allotment of bank with whom final formalities and changes if any to the project cost are worked out

Training

  • Successful candidates undergo required training from agencies earmarked. Only after the successful completion of training will the bank loan be released. 

Establishment of Units and Commencement of Production

  • The applicant is required to arrange for Margin Money and Collateral if any. And after taking required clearances from the appropriate authorities, the business unit may be established and commence production. 

Payment of Interest and Repayment of the Loan

  • After the moratorium period, if any, the loan has to be repaid with regular interest payments as in with any other loan. 

It is always important to remember that though this is a government-aided scheme, the principal with interest has to be repaid as per the agreed terms of the loan. If it’s not addressed, you are at risk of lowering your credit score. 

Also, check out our offerings of business loans from a wide variety of lenders.