Government Sponsored Scheme

Government Sponsored Scheme: Jaiib Paper 1 (Module B) Unit-13

Dear bankers,

As we all know that  is Government Sponsored Scheme for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are providing the Government Sponsored Scheme (Unit-13),FUNCTIONS OF BANKS (Module B), Principle & Practice of Banking JAIIB Paper-1.

♦Swarnajayanti Gram Swarozgar Yojana

  • Swarnajayanti Gram Swarozgar Yojana (SGSY) was enacted in the dawn of the financial year of 1999-2000 as a replacement of six other affiliated schemes. The initiative was designed as an integrated program that caters to the self-employment of the rural poor. It is funded by the Centre and the State in a 75:25 ratio and is implemented by commercial banks, regional banks and cooperative banks. Other financial institutions, Panchayat Raj institutions, District Rural Development Agencies (DRDAs), Non-Government Organizations (NGOs), and technical institutions in the district will also undertake the process of planning, implementing and monitoring the scheme. This article seeks to create awareness of this self-employment scheme.

Following existing Scheme:

  • Integrated Rural Development Program (IRDP)
  • Training of Rural Youth for Self-Employment (TRYSEM)
  • Development of Women and Children in Rural Areas (DWCRA)
  • Supply of Improved Toolkits to Rural Artisans (SITRA)
  • Ganga Kalyan Yojana (GKY)
  • Million Wells Scheme (MWS)


  • The scheme is established with the intent of bringing the assisted low-income families (also referred to as swarozgaris) above the poverty line by providing them with an appreciable sustained income over a period of time. This shall be fulfilled by organizing the rural poor into Self-Help Groups (SHGs) through the process of social mobilization, training, capacity building and provision of income generating assets.
  • The scheme envisages the development of activity clusters with an emphasis on key activities identified in the block, both for the group as well as for individual assistance. These activity clusters will be in geographic clusters of neighbouring villages within a reasonable radius.

Self-Help Groups

  • The Self-Help Groups (SHGs) will be organized by ‘Swarozgaris’ drawn from the BPL list approved by the Gram Sabha. The scheme facilitates the formation of Self-Help Groups (SHGs), who will be assisted on a loan-cum-subsidy.

Coverage of the Scheme

  • The scheme caters to the rural communities such as those with land, landless labour, educated unemployed, rural artisans and the disabled. The assisted low-income families could be either individuals or groups and would be selected from Below Poverty Line (BPL) families by a three-member team comprising of a Block Development Officer (BDO), banker and sarpanch.
  • The scheme specifically focuses on the vulnerable sections of the rural poor. The SC/ST would gain the bulk of assistance (50%), while a proportion of the remaining funds would be earmarked for women and the disabled.
  • The scheme is aimed at the development of Swarozgaris through training courses that are designed in accordance with the activities selected and the requirements of each swarozgari.

The scheme entails the following processes:

  • Group Creation – This stage covers the assessment of the skill level of the members.
  • Capital Creation – This involves the use of a rotating fund system. Here, the members are facilitated to hone their skills through experience.
  • Implementation – the final stage deals with the identification and nurturing of abilities and group skills. The implementation is processed according to the pace desired by the respective groups.

The subsidy allocation for the scheme is as follows:

  • A uniform subsidy of 30% of the total project cost is allowed under the scheme, subject to a ceiling of Rs. 7,500.
  • A subsidy of 50% of the total project cost, subject to a ceiling of Rs. 10,000 is extended to SC/STs and disabled persons.
  • A subsidy of 50% of the total project cost, subject to a ceiling of Rs. 1.25 lakh or per capita subsidy of Rs. 10,000 (whichever is less) is provided to Self-Help Groups (SHGs) and individual swarozgaris.
  • No monetary limits on subsidy have been specified for irrigation projects.
  • Subsidy under these provisions is back-ended. The banks are prohibited from charging interest on the subsidy portion of the loan amount.
  • As already stated, special emphasis will be laid on vulnerable groups among the rural poor

Security Norms

  • For Individual Loans up to Rs. 50000 and group loans up to Rs. 5 lakhs, the assets created out of the bank loan would be hypothecated to the bank as primary security.


♦Swarna Jayanti Shahari Rozgar Yojana

  • Swarna Jayanthi Shahari Rozgar Yojana was launched as a replacement of three other schemes that addressed poverty alleviation, namely Nehru Rozgar Yojana (NRY), Urban Basic Services for the Poor (UBSP), and Prime Minister’s Integrated Urban Poverty Eradication Program (PMIUPEP). The scheme was later refurbished in the year 2009 with revised guidelines. This article seeks to provide awareness of this welfare initiative.

Funding Pattern

  • The scheme will be funded on a ratio of 75:25, wherein the Central Government contributes the majority and the state governments the least.  The ratio of funding differs for special category states, where the same has been affixed as 90:10 in a similar proportion between the Central and State Governments.

The states classified as special category includes:

  • Arunachal Pradesh
  • Sikkim
  • Tripura
  • Jammu & Kashmir
  • Himachal Pradesh
  • Uttarakhand
  • Assam
  • Manipur
  • Meghalaya
  • Mizoram
  • Nagaland


  • The scheme is primarily aimed at providing profitable employment to the urban unemployed and the underemployed poor by encouraging the setting up of self-employment ventures or provision of wage employment. Its other objectives include:
  • Promotion of skill development and training programs so as to provide the urban poor with access to employment opportunities opened up by the market to undertake self-employment.
  • The Empowerment of the community to address the issues of urban poverty through suitable self-managed community structures like Neighborhood Groups (NHGs), Neighborhood Committees (NHC), Community Development Society (CDS), etc.

Components of the Scheme

The scheme consists of five major components, which are:

  • Urban Self-Employment Program (USEP)
  • Urban Women Self-Help Program (UWSP)
  • Skill Training for Employment Promotion amongst Urban Poor (STEP-UP)
  • Urban Wage Employment Program (UWEP)
  • Urban Community Development Network (UCDN)


Urban Self-Employment Program

This component is further classified into two sub-components, which includes:

  • Assistance to individual urban poor beneficiaries for setting up profitable self-employment ventures (loan and subsidy).
  • Technology/marketing/infrastructure/knowledge and other support provided to the urban poor for setting up their enterprises as well as marketing their products (technology, marketing and other support).

Target Groups

  • The benefits of USEP are extended to the BPL (Below the Poverty Line) segment of the urban population. The program lays special emphasis on women, people associated with the Scheduled Castes (SC)/Scheduled Tribes (ST), different-abled people and such other categories as may be indicated by the Government from time-to-time.

Identification of Beneficiaries

  • The beneficiaries will be spotted through a house-to-house survey, with a focus on slums and low-income settlements. Model Formats for executing slum survey, household survey and livelihoods survey will be laid out by the Ministry of Housing & Urban Poverty Alleviation. Community strictures such as Neighborhood Groups, Neighborhood Committees and Community Development Societies are entrusted with the task of identifying the beneficiaries through the assistance of the City/Town Urban Poverty Alleviation Cell (UPA Cell). Assistance for this purpose could also be sought from NGOs or other identified bodies.

Focus Sectors

  • For the purpose of self-employment, the focus areas include the production sector, the services sector, and the business sector.

Financing Pattern

Listed below are the particulars of financing pattern under the program:

  • Maximum allowable subsidy – 25% of the Project Cost subject to a maximum of Rs. 50,000.
  • Margin – 5% of the project cost.
  • Collaterals – Nil
  • Permitted Financial Support to Micro Business Centres – up to Rs. 80 lakhs per MBC (efforts must for the gradual self-sustenance of these MBCs).

Urban Women Self-Help Program (UWSP)

This particular component proposes the following:

  • Assistance to groups of urban poor women for setting up profitable self-employment ventures –UWSP (Loan & Subsidy).
  • Revolving Funds for Self-Help Groups (SHGs)/Thrift and Credit Societies (T&CSs) formed by the urban poor women – UWSP (Revolving Fund).

Urban Women Self-Help Group Programme (Loan & Subsidy)

  • This program envisages the provision of a special incentive for the urban poor women who are on the pursuit of self-employment ventures in a group as opposed to individual effort. Groups of urban poor women may adopt an economic activity in accordance with their skill, training, aptitude, and local conditions. Apart from income generation, this group strategy entails the empowerment of the urban poor women by making them independent and providing a conducive atmosphere for self-employment.
  • The UWSP group will be entitled to a subsidy of Rs. 3,00,000/35% of the cost of project/Rs. 60,000 per Member of the Group (the lower of the three). The remaining sum will be mobilized as Bank Loan and Margin.

Urban Women Self-Help Program (Revolving Fund)

  • While the UWSP group sets itself as a Self-Help Group (SHG)/Thrift and Credit Society (T&CS), they shall also be entitled to a lump sum grant of Rs. 25,000 as revolving fund at the rate of Rs. 2000 (at the max) per member. Such funds are also extended to a simple Self-Help Group/Thrift and Credit Society.

Revolving funds are meant for the use of SHG/T&CS for purposes such as:

  • Procurement of raw material and marketing.
  • Infrastructure support (for income generation and other group activities).
  • Expenses within the range of Rs. 500 (to meet the travel costs of group members for visits to bank, town UPA Cell, etc).

♦Prime Minister’s Employment Generation Programme

  • Generation of sustainable and continuous self-employment opportunities in urban and rural areas of the country.
  • Providing sustainable and continuous employment to a large segment of rural and urban unemployed youth, traditional and prospective artisans through the establishment of micro-enterprises
  • Facilitating the financial institution’s participation for higher credit flow to the micro sector


  • Individuals with age of 18 years or more
  • Passing standard VIII is required for a project above Rs 5 lakh in the service sector and above Rs 10 lakh in the manufacturing sector
  • Institutions registered under Societies Registration Act- 1860
  • Production based co-operative societies
  • Self-help groups and charitable trust

Salient features of the scheme

  • The Scheme is implemented through Khadi and Village Industries Commission, State Khadi and Village Industries Commission Directorates, State Khadi and Village Industries Boards and District Industries Centres and banks in Urban and Rural areas in the ratio of 30:30:40 between Khadi and Village Industries Commission / Khadi and Village Industries Boards / DIC respectively
  • Assistance under the PMEGP is only available to new units that are to be established
  • There is no income ceiling for setting up projects
  • Existing units or units that are already availing any government subsidy (State or Central) are ineligible
  • Any industry including coir based projects (excluding those mentioned in the negative list) can take advantage of this scheme
  • The per capita investment under the scheme should not exceed Rs 1 lakh in plain areas and Rs 1.5 lakh in hilly areas.
  • Maximum project cost Rs 10 lakh in the service sector and Rs 25 lakh in the manufacturing sector is this limit.

Areas of Operation

  • Rural area, as stated under Khadi and Village Industries Commission Act 2006 – Scheme, means the area comprised in any village and includes the area comprised in any town. The population should not exceed twenty thousand or such other figure as the Central Government may specify from time to time.
  • In the urban area, only District Industries Centres (DIC) are included.


  • The margin money contribution is 5% of the cost of the project for special category borrowers and 10% for General category borrowers.
  • Illustration: Suppose Miss Nishitha applies to XYZ bank for Rs 8 lakh loan, the bank might finance only 80% of the loan amount (ie Rs 6,40,000/-). The balance 20% (ie Rs 1,60,000/-) is called as margin money and Nishita has to make arrangements for the same.


  • General Category: The eligible subsidy is 25% of the cost of the project in rural areas and 15% in urban areas.
  • Special Category: The eligible subsidy is 35% of the cost of the project in rural areas and 25% in urban areas.

Quantum of margin money subsidy

Categories of beneficiaries under PMEGP Beneficiary’s own contribution (of project cost) Rate of Subsidy  
Urban Rural
General Category           10% 15% 25%
Special Category (including SC/ST/OBC /Minorities/ Women, Ex-Servicemen, Physically handicapped, NER, Hill, and Border areas etc)               5% 25% 35%

How does this scheme work?

Let’s assume Mr. Don, a young new entrepreneur from Bangalore Urban, wants to apply for the PMEGP scheme

  • Estimated Project Cost – Rs 10 lakh
  • Mr. Don’s Contribution (Mandatory as per PMEGP) – Rs 1 lakh (10% of Rs 10 lakh)
  • Amount Received By Mr. Don – Rs 9 lakh
  • Note: The margin money (ie 15% of the Project Cost – Rs 1,50,000/-) generally withheld by the bank will be reimbursed to the bank by KVIC within 24 hours of acceptance of the PMEGP application. Hence, entrepreneurs like Mr. Don can get the required capital to proceed with their venture very easily/


  • Banks will finance capital expenditure in the form of a term loan and working capital in the form of cash credit. Projects can also be financed in the form of composite loan consisting of capital expenditure and working capital
  • The bank credit will be ranging between 60-75% of the cost after deducting (Margin Money) subsidy and the owner’s contribution.
  • Though banks will claim subsidy on the basis of the projections of capital expenditure mentioned in the project report, Margin Money can be availed only on the actual availment of capital expenditure and excess if any, is to be refunded to KVIC
  • Working Capital component should be utilized in such a manner that at one point it should touch 100% limit of the cash credit within 3 years of the lock-in period of margin money and not less than 75% utilization of the sanctioned limit.

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