KVIC ' S

MARGIN MONEY SCHEME

1.0 INTRODUCTION :
Government of India through Khadi and Village Industries Commission has int
roduced Margin Money Scheme ( MMS) in order to create large employment opport
unities in rural areas of the Country. This scheme is to encourage establishment
of village industries in the Country by providing certain fixed amount as M
argin Money. Since 1997, this programme is being implemented through Nationalise
d Banks. To supplement the efforts of the Nationalised Banks and to ensure that
the scheme reaches the nook and corners of the State, this scheme is being now
extended to Co-operative Banks, Private Sector Scheduled Commercial Banks and S
tate Financial Corporation.
2.0 FEATURES OF THE SCHEME :
i) This scheme is applicable for units coming up in rural areas only for establ
ishing village industry projects.
Rural Area means :
Which is classified as ' Village ' under revenue records of the District and in
cludes the area comprised in any town, the population of which does not exceed
20,000 as per 1991 census or such other figure as the Central Government may sp
ecify form time to time.
Village Industry means:
Any industry located in rural area which produces any goods or renders any servi
ces with or without the use of power and in which the fixed capital investment
per head does not exceed Rs. 50,000/- or such other figure as the Central Gov
ernment may specify from time to time.
However , following industries / activities classified under " Negative List "
shall not be eligible for funding under the scheme .
a) Any industry / business connected with meat ( slaughtered), i.e. proces
sing, canning and / or serving items made of it as food, production/ manufactur
ing.
b) Sale of intoxicant items like beedi / pan / cigar / cigarette etc.,
c) Hotel of dhaba or sales outlet serving liquor.
d) Preparation / producing tobacco as raw materials.
e) Tapping of toddy for sale.
f) Any industry/ business connected with cultivation of crops/ plantation
like tea, coffee , rubber etc., sericulture ( Cocoon rearing ).
g) Activities related to coir, horticulture, floriculture, animal husbandry l
ike pisciculture, piggery, poultry etc.,
h) Khadi and Polyvastra and any project producing yarn and cloth.
i) Manufacturing of plastic carry bags of less than 20 microns thickness.
j) Manufacturing of carry bags or containers made of recycled plastics
for storing, carrying, dispensing or packaging of food stuff.
k) Any other item which causes environmental problems.
ii) The Banks have to ensure that the project is viable both technically a
nd economically and take their own credit decision on the basis of viability o
f each project.
iii) This scheme is available for individual entrepreneur as well as co- oper
ative societies/
trusts. In case of individual entrepreneur the project cost ce
iling limit is fixed at
maximum of Rs.10. lakhs. In case of co-operative societies / trusts t
he project cost
ceiling limit is fixed at maximum of Rs.25. lakhs.
iv) The project cost consists of two components - Fixed Capital and Working C
apital.

Fixed Capital

a) Workshed ( only in cases where it is very essential )

b) Machinery / Equipment
c) Preliminary & Pre -operative expenses
d) Miscellaneous fixed assets
e) Interest during implementation
f) Deposits ( KEB , Telephone etc.)
g) Contingencies.
Please note that the financial assistance should not be extended towards the la
nd cost. The beneficiaries should be encouraged to start the activities in the
ir own shed or by acquiring the shed on rental / lease basis.
Working Capital :
One cycle of working capital requirement is also included in the project cost.

v) Banks must ensure investment of " own contribution " of the individual
/ co-operative society etc., @ 10% of the total cost of the project for general
category and 5 % in the case of special category.
The Special category beneficiaries means -
Scheduled Caste (SC ) Scheduled Tribe (ST) Other Backward Classes (OBC),
Physically Handicapped (PH) Women, Ex-servicemen, Minority Community be
neficiaries.
VI) The Bank will initially sanction total project cost (-) minus own con
tribution of the beneficiary, i.e., 90% or 95% of the project cost as the
case may be and disburse the amount in stages suitably for setting up of the pro
ject.
VII) The projects established by the individual beneficiary / entrepreneu
r are eligible for maximum margin money of RS. 2.50 lakshs in case of general ca
tegory and Rs.3.00 lakhs in case of special category.
VIII) The projects established by co- operative societies/ trusts are eligi
ble for maximum margin money of Rs.4.00 lakhs. For example:- if the project is e
stablished by general category beneficiaries involving , let us say project cost
of Rs.25.00 laksh, then the margin money is calculated at 25% of the project co
st upto Rs.10.00 lakhs project plus 10% of the project cost for remaining cost o
f the project over and above Rs.10.00 lakhs and upto Rs.25.00 lakhs. In case of
special category beneficiaries involving, let us say project cost of Rs.25.00 la
khs, then the margin money is calculated at 30% of the project upto RS.10.00 lak
hs project plus 10% of the project cost for remaining cost of the project over a
nd above Rs.10.00 lakhs and upto Rs.25.00 lakhs but maximum limit is fixed at Rs
.4.00 lakhs only.
IX) The margin money scheme is applicable for New village industry projec
ts only. This scheme is not applicable for expansion/ modernisation / diversific
ation of already existing industry .
X) Once the margin money is released in favour of the loancee, it should
be kept in term deposit for 2 years at Bank level in the name of the beneficiar
y and Bank interest accrued on such deposit will be utilised to service partia
l interest burden on the loan disbursed to the beneficiary.
XI) Since margin money is to be provided in the form of middle- end subsi
dy ( grant(, it will be credited to the borrower's loan account after 2 years fr
om the date of first disbursement to the borrower / institution. In case, the Ba
nk's advance goes " bad" before 2 years period is over, margin money will be adj
usted by the bank to liquidate loan liability of the borrower either in part or
full.
XII) In case any recovery is effected subsequently by the Bank from any s
ource whatsoever, such recovery will be utilised by the Bank for liquidating the
ir outstanding dues first. Any surplus thereafter will be remitted to KVIC.
XIII) Margin Money will be one time assistance from KVIC. For any enhancem
ent of credit limit or expansion / modernisation of the project, the KVICs margi
n kmoney assistance will not be available.
3.0 TRAINING :
Training has been made compulsory under this scheme. The cost of the training to
be included in the cost of the project
In order to enhance quality lending and success rate of the Margin Money Scheme,
it is proposed to conduct training programme for the potential entrepreneurs in
three stage:
a) Entrepreneur Awareness Programme ( EAP)
b) Entrepreneurship Development programme ( EDP)
c) Skill Development Programe (SDP)
The brief note on each training, programme is given below.
a) Entrepreneur Awareness Programme (EAP)
This programme is conducted for all the potential entrepreneurs who are willing
to establish rural based industries by availing assistance under Margin Money S
cheme. This programme is intended to create awareness about Margin Money Scheme
and to identify potential entrepreneurs who can be given further intensive trai
ning on entrepreneurship. The duration of the programme is one day.

b) Entrepreneurship Development Programme ( EDP)

This programme will be conducted for the candidates who have attended EAP and sh
ows entrepreneurial qualities to establish specific industry. This programme is
intensive in nature and all the inputs necessary for becoming a successful entre
preneur will be provided in this programme. The duration of the training program
me is for 15 days. and preferably residential in nature.
c) Skill Development Programme ( SDP)
This training programme will be organised for the candidates Completing EDP and
further requires Skill Development in the specific field. The duration of the t
raining varies from 7 days to 3 months depending on the requirement of the parti
cular activity .
All the above training programmes will be conducted through established trainin
g institutes/ voluntary organisation in Karnataka State. The number of candidat
es for each training programme will be decided based on the demand for such pro
grammes. The State Directorate of KVIC will also be involved in conducting of ab
ove training programmes.
4.0 MARKETING SUPPORT : -
The existing network of about 340 khadi Bhandars in Karnataka could the utilised
to market the products produced by the village industries on consignment basis
. In addition, the Banks are advised to encourage more retail outlets under this
scheme itself
The KVIB has launched' NISARGA ' brand for marketing of KVI products. The assist
ed units under Margin Money scheme can use this brand for marketing of their p
roduce.
5.0 HOW TO CLAIM ?
The Co - operative Banks, Private Scheduled Commercial Banks and State Financial
Corporation can claim margin money amount on selective basis directly from the
Khadi and Village Industries Board with the following documents.
1.
A copy of the certified relevant ledger extracts of the loan account to pr
ove that the total loan has been release to the unit.
2.
Duly filled -in application form as indicated in proforma -1.
6.0 PERIODICAL REPORTING:
The Head Office of the Private Sector Scheduled Commercial Banks / Co-operative
Banks / State Financial Corporation has to submit District - wise quarterly pro
gress report ( as per Proforma-2) to the Khadi and Village Industries Board, Ban
galore and a copy of the report to the directorate of Economic Research Khadi an
d Village Industries Commission Mumbai Such report should be submitted for Ap
ril- June, July- September, October- December and January - March quarters. Suc
h quarterly progress reports should also include the District - wise monthly sta
tement of margin money claim submitted and claim settled.
7.0 INVESTMENTS SUBSIDY :
In addition to the Margin Money, certain activities in some Districts / Taluks a
re also eligible for investment subsidy on the fixed assets investment as per th
e New Industrial Policy ( 2001-2006) announced by the State Government. For the
purpose of the subsidy the State is categorised into A, B, C & C Zoncs as ind
icated
CLASSIFICATION OF ZONES
Zone

Particulars

Industry Sector Eligible for subsidy

Investment subsidy
A

Developed Areas

Nil

Nil
B

Developing Areas

Tiny Industries

10% value of fixed assets subject to a max. of R.5 lakshs

C
Backward Areas

Tiny Industries

20% value of fixed assets subject of a max.of Rs.10 lakshs

D

As detailed in
Annex 1

Tiny & Small Scale industries, 25% value of fixed assets subject ot a max of Rs
.12.50 lakshs.

The Districts/ Taluks covered under each Zone for Investment Subsidy is given i
n
Annex -1.
8.0 CERTIFICATE OF REGISTRATION :
The KVIB will issue a Certificate of Registration after due verification of the
new unit by the concerned District Officer. This certificate will facilitate the
beneficiary to avail various incentives and concession offered by the State and
Central Governments. The Certificate of Registration format is enclosed.