India has launched the Operational Guidelines for the Urban Challenge Fund (UCF) and the Credit Repayment Guarantee Sub-Scheme (CRGSS) to strengthen urban infrastructure financing. The initiative is designed to make cities investment-ready, financially sustainable and capable of supporting the next phase of urban growth. It also aims to mobilise large-scale private and market-based capital for transformative urban projects.
Urban Challenge Fund Framework
The UCF has a total Central Assistance of ₹1 lakh crore. It is structured as a catalytic fund rather than a direct grant scheme. The Centre will provide up to 25% of project cost, while the remaining resources are expected to come from municipal bonds, bank loans and public-private partnerships. The model is intended to leverage nearly four times the investment through market-linked financing.
Project Allocation and Priorities
Out of the total outlay, ₹90,000 crore has been earmarked for projects, ₹5,000 crore for project preparation and capacity building, and ₹5,000 crore for the CRGSS. The fund will support:
- Redevelopment of old city areas and markets.
- Urban mobility and last-mile connectivity.
- Non-motorised transport systems.
- Water and sanitation infrastructure.
- Climate-resilient urban development.
The focus is on scalable and bankable projects with long-term economic and social value.
Credit Repayment Guarantee Support
The CRGSS is meant to help smaller cities, including Tier-II and Tier-III cities, as well as hill and North-Eastern cities, access market financing. Credit guarantees under this sub-scheme are expected to improve lender confidence and widen access to capital for urban projects. The scheme is also linked to stronger project preparation and financial discipline.
Institutional Collaboration and Urban Reform
The launch also included an e-directory connecting cities with financial institutions, banks and credit rating agencies. A Memorandum of About was digitally signed between the Ministry and all States to support implementation. Letters of Intent were also exchanged with knowledge partners, financial institutions and private sector entities. The UCF will operate from FY 2025–26 to FY 2030–31 and is aimed at building globally competitive and resilient cities.
Last Modified: April 27, 2026