The government on Wednesday, 15 April, launched the operational guidelines for the ₹1 lakh crore Urban Challenge Fund along with the Credit Repayment Guarantee Sub-Scheme, marking the formal rollout of a new urban infrastructure financing framework aimed at mobilising large-scale investment in cities.
According to a statement by the Ministry of Housing and Urban Affairs, the Urban Challenge Fund has a total Central Assistance outlay of ₹1 lakh crore and is intended to catalyse nearly ₹4 lakh crore of urban investment through market-based financing mechanisms.
Union Housing and Urban Affairs Minister Manohar Lal, who launched the operational guidelines, said Central Assistance under the fund will be capped at 25 per cent of project cost, while at least 50 per cent of the funding is expected to be mobilised through instruments such as municipal bonds, bank loans and public-private partnerships.
Of the total outlay, ₹90,000 crore has been earmarked for projects, ₹5,000 crore for project preparation and capacity building, and another ₹5,000 crore for the Credit Repayment Guarantee Sub-Scheme.
The ministry said the CRGSS is expected to help smaller cities, including Tier-II and Tier-III cities as well as cities in hilly and North-Eastern regions, access market-based financing.
The fund will support projects in 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.
The minister said the focus will be on scalable and bankable projects intended to generate long-term economic and social benefits.
The Urban Challenge Fund will be implemented from FY 2025-26 to FY 2030-31.
An e-directory linking cities with financial institutions, banks and credit rating agencies was also launched at the event.
The ministry also signed a Memorandum of Understanding with all States for implementation of the fund.
In addition, Letters of Intent were signed with knowledge partners, financial institutions, credit rating agencies, merchant bankers and private sector entities to support financing, capacity building and project execution.
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