Government  of  India  through  Khadi and Village  Industries Commission has introduced Margin Money Scheme  ( MMS) in order to create  large employment  opportunities in rural areas of the Country. This scheme is to encourage establishment of village  industries in the Country  by providing  certain fixed  amount as Margin Money. Since 1997, this programme is being implemented through Nationalised  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 State Financial  Corporation.


i) This scheme is applicable for units coming up in rural areas only for  establishing  village  industry  projects.

Rural Area  means :

Which is classified as ' Village ' under revenue records of the District  and includes 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 specify  form time to time.

  Village Industry   means:           

Any industry located in rural area which produces any goods or renders any services 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 Government 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.  processing, canning and / or serving  items made of it as food, production/ manufacturing.

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 like  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 and economically  and take their own  credit decision on the basis of viability of each project.

iii)    This scheme is available for individual entrepreneur as well as co- operative societies/

      trusts.  In  case  of   individual   entrepreneur   the  project  cost  ceiling limit is fixed at       

      maximum of Rs.10. lakhs. In case of   co-operative  societies  /  trusts the project cost 

      ceiling limit is fixed at maximum of Rs.25. lakhs.

iv)   The project cost consists  of two components - Fixed Capital and Working Capital.


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 land cost. The beneficiaries  should be encouraged to start the  activities in their 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 beneficiaries.

VI)        The Bank will initially sanction total project cost (-) minus own contribution 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 project.

VII)       The  projects established by the individual beneficiary / entrepreneur are eligible for maximum margin money of RS. 2.50 lakshs in case of general category and Rs.3.00 lakhs in case of special category.

VIII)      The projects established by co- operative societies/ trusts are eligible for maximum margin money of Rs.4.00 lakhs. For example:- if the project is established 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 cost upto Rs.10.00 lakhs project plus 10% of the project cost for remaining cost of 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 lakhs, then the margin money is calculated at 30% of the project upto RS.10.00 lakhs project plus 10% of the project cost for remaining cost of the project over and 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 projects only. This scheme is not applicable for expansion/ modernisation / diversification  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 beneficiary and Bank interest accrued   on such deposit will be utilised to service partial interest burden on the loan disbursed to the beneficiary.

XI)        Since margin money is to be provided in the form of middle- end subsidy ( grant(, it will be credited to the borrower's loan account after 2 years from the date of first disbursement to the borrower / institution. In case, the Bank's advance goes " bad" before 2 years period is over, margin money will be adjusted 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 source whatsoever, such recovery will be utilised by the Bank for liquidating their outstanding dues first. Any surplus thereafter will be remitted to KVIC.

XIII)       Margin Money will be one time assistance from KVIC. For any enhancement of credit limit or expansion / modernisation of the project, the KVICs margin 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  Scheme. This programme is intended to create awareness about  Margin Money Scheme and to identify potential entrepreneurs who can be given further intensive training 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 shows entrepreneurial qualities to establish specific industry. This programme is intensive in nature and all the inputs necessary for becoming a successful entrepreneur will be provided in this programme. The duration of the training programme 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 training varies from 7 days to 3 months depending on the requirement of the particular activity .

All the above training programmes  will be conducted through established training  institutes/ voluntary organisation in Karnataka State. The number of candidates for  each training programme will be decided based on the demand for such programmes. The State Directorate of KVIC will also be involved in conducting of above training programmes.


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 assisted units under  Margin Money scheme can use this brand for marketing  of their produce.

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 prove that the total loan has been release to the unit.

  2. Duly filled -in application form as indicated in proforma -1.


The  Head Office of the Private Sector Scheduled Commercial Banks / Co-operative Banks / State Financial Corporation has to submit District - wise quarterly progress report ( as per Proforma-2) to the Khadi and Village Industries Board, Bangalore and a copy of the report to the directorate of Economic Research Khadi and Village Industries  Commission Mumbai   Such report should be submitted for April- June, July- September, October- December  and January - March quarters. Such quarterly progress reports should also include the District - wise monthly statement of margin money claim submitted and claim settled.


In addition to the Margin Money, certain activities in some Districts / Taluks are also eligible for investment subsidy on the fixed assets investment as per the 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 indicated




Industry Sector  Eligible for subsidy

Investment subsidy


Developed Areas




Developing Areas

Tiny Industries

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


Backward Areas

Tiny Industries

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


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 in

Annex -1. 


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.