The handmade paper industry utilizing non-woody raw materials such as cow-dung produces an organic-matter rich effluent which is relatively less harmful to environment. In this study, a novel biofertilizer formulated by enriching this effluent with selected Plant Growth Promoting Rhizobacteria (PGPR) was tested for its biofertilizing potential against the NU1919 variety of green chilli (Capsicum frutescens). The study was conducted using four treatments in triplicates with the Randomized Block Design. Parameters related to plant growth promotion-including number of fruits per plant, average fruit length, fruit yield per plant, average plant height and number of branches-were recorded. The best performance was observed in Set D, which used a consortium of Azotobacter sp. and Enterobacter sp. along with unautoclaved effluent (raw liquor, RL). Similarly, average girth and average fruit weight (fresh and dry weight) were also recorded to be maximum in the red chillies harvested from this Set D. The maximum shoot length was found to be in Set D, whereas the maximum root length was observed in Set A which used the RL without any additional bacterial cultures. Vitamin A was found to be maximum in the case of Set A, whereas Vitamin C was found to be almost equal in two Sets (Set A, 167.79 mg/100 g and Set D, 167.30 mg/100 g). The experimental Set C with Bacillus and Azotobacter showed maximum capsaicinoid content (67793.18 SHU). This study highlights the potential of PGPR-enriched biofertilizers, formulated using effluent from the handmade paper industry, for enhancing chilli cultivation.