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Why in News?
The Union Cabinet has approved the Urban Challenge Fund (UCF), a new Centrally Sponsored Scheme aimed at financing large-scale urban infrastructure through market-linked funding and competitive project selection.
Key Features of Urban Challenge Fund
- Central Assistance: ₹1 lakh crore
- Implementation Period: FY 2025–26 to 2030–31 (extendable up to 2033–34)
- Ministry: Ministry of Housing and Urban Affairs
Funding Structure
- Central government support: 25% of project cost
- Minimum 50% must be raised from the market, such as:
- Municipal bonds
- Bank loans
- Public–Private Partnerships (PPPs)
Expected total investment mobilised: About ₹4 lakh crore in the urban sector over five years.
Coverage and Eligibility
Eligible Cities
- Cities with population ≥ 10 lakh (2025 estimates)
- All State and Union Territory capitals
- Major industrial cities with population ≥ 1 lakh
Special Support Mechanism
- Credit Repayment Guarantee Scheme for:
- Urban Local Bodies (ULBs) in hilly and northeastern States
- Smaller ULBs with population below 1 lakh
Objectives of the Fund
- Mobilise market finance for urban infrastructure
- Reduce dependence on public grants
- Encourage private sector participation
- Build productive, inclusive and climate-responsive cities
- Strengthen cities as engines of economic growth
