- Recently, the Union Cabinet, chaired by the Prime Minister of India, approved the launch of the Urban Challenge Fund (UCF).
- It is a Centrally Sponsored Scheme under the Ministry of Housing and Urban Affairs.
- Objective: To build resilient, productive, inclusive, and climate-responsive cities, positioning urban centres as key drivers of India’s next phase of economic growth.
- Financial Outlay: ₹1 lakh crore as total Central assistance.
- Tenure: Operational from FY 2025-26 to FY 2030-31. Implementation may be extended up to FY 2033-34.
- Key Features of UCF
- Market-based Financing Model: At least 50% of project funding must be mobilised from market sources such as Municipal bonds, Bank loans and Public–Private Partnerships (PPPs)
- The remaining funding can be contributed by States, Union Territories (UTs), Urban Local Bodies (ULBs), or other sources.
- Selection Process: Projects will be chosen through a transparent, competitive challenge mode, promoting high-impact and reform-oriented proposals.
- Focus Areas: Strong emphasis on reforms in Urban Governance, Market & Financial Systems, Operational Efficiency and Urban Planning.
- Credit Enhancement Support: A dedicated ₹5,000 crore corpus to enhance the creditworthiness of 4,223 cities, including Tier-II and Tier-III cities, especially for first-time access to market finance.
- The UCF will cover:
- All cities with a population of 10 lakh or more (2025 estimates)
- All State and Union Territory capitals not covered above
- Major industrial cities with a population of 1 lakh or more
- Additionally, all ULBs in hilly States and North-Eastern States and smaller ULBs with population below 1 lakh will be eligible for support under the Credit Repayment Guarantee Scheme.
