Union Minister for Housing and Urban Affairs Shri Manohar Lal on Thursday launched the Operational Guidelines for the Urban Challenge Fund (UCF) along with the Credit Repayment Guarantee Sub-Scheme (CRGSS) in New Delhi, marking a significant move aimed at reshaping urban infrastructure financing in India.
Representatives from multiple states, including Madhya Pradesh, Gujarat and Odisha, attended the event. Chief Ministers Shri Mohan Yadav of Madhya Pradesh and Shri Mohan Charan Majhi of Odisha addressed the gathering through video messages.
Addressing the gathering, Shri Manohar Lal said the Urban Challenge Fund signals a shift in how India approaches urban development financing. He emphasised that the initiative is not limited to grants but is designed to leverage public funds to attract larger investments and make cities financially stronger and investment-ready.
He noted that cities are increasingly emerging as centres of economic growth, innovation and employment generation. According to him, achieving the vision of Viksit Bharat @2047 will depend on effective planning, financing and governance of urban areas. While schemes such as AMRUT, Swachh Bharat Mission and Smart Cities Mission have strengthened infrastructure, he said the next phase requires cities to become financially sustainable and capable of attracting investments.
The Minister said the Urban Challenge Fund has a total Central Assistance of ₹1 lakh crore and is structured to mobilise nearly four times that amount through market-based financing. He added that Central Assistance will be capped at 25 per cent of project costs, while at least 50 per cent of funding will be raised through municipal bonds, bank loans and public-private partnerships.
He further stated that ₹90,000 crore of the total outlay has been earmarked for projects, ₹5,000 crore for project preparation and capacity building, and ₹5,000 crore for the Credit Repayment Guarantee Sub-Scheme. The CRGSS is expected to support smaller cities, including Tier-II and Tier-III cities and those in hilly and North-Eastern regions, by enabling access to market-based financing through credit guarantees.
The Minister said the Fund will support projects across sectors such as redevelopment of old city areas and markets, urban mobility and last-mile connectivity, non-motorised transport, water and sanitation infrastructure, and climate-resilient urban development. He added that the focus will be on scalable and financially viable projects with long-term economic and social impact.
Highlighting the role of Urban Local Bodies (ULBs), Shri Manohar Lal said cities will be encouraged to strengthen financial capacity, adopt reforms and actively engage in market-based financing. He urged states and ULBs to treat the Fund as an opportunity to build resilient and globally competitive cities.
Secretary, Ministry of Housing and Urban Affairs, Shri Srinivas Katikithala, said India’s urbanisation is entering a critical phase. He described the Urban Challenge Fund as a market-linked and reform-driven framework that aligns infrastructure creation with financial sustainability and institutional strengthening.
He added that the initiative places emphasis on project bankability and fiscal discipline, and its success will depend on cooperation between the Centre, states and urban local bodies, along with effective implementation of reforms.
An e-directory linking cities with financial institutions, banks and credit rating agencies was also launched to support implementation of the Fund.
The event also saw the digital signing of a Memorandum of Understanding between the Ministry and all states, signalling a joint commitment to the scheme’s rollout. Letters of Intent were signed with stakeholders, including academic institutions, capacity-building centres, financial institutions, credit rating agencies and private sector entities, to support financing and execution of projects.
The Urban Challenge Fund will be implemented from FY 2025–26 to FY 2030–31, with the aim of transforming cities into key growth hubs driving India’s urban development.
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