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Release of Operational Guidelines for the Urban Challenge Fund (UCF)

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  • News: Recently, the Minister of Housing and Urban Affairs launched the "Credit Repayment Guarantee Sub-scheme (CRGSS)" on 16th April, along with guidelines for the implementation of the UCF.

Urban Challenge Fund (UCF)

  • Total Outlay: ₹1 lakh crore.
    • Out of the total outlay,
      • ₹90,000 crore has been allocated for projects,
      • ₹5,000 crore for project preparation and capacity building, and
      • ₹5,000 crore for the CRGSS.
  • Objective: To build resilient, productive, inclusive, and climate-friendly cities.
    • This fund is designed as a catalytic mechanism, aiming to leverage market-based financing to scale up investments approximately fourfold.
  • Nodal Ministry: Ministry of Housing and Urban Affairs.
  • Type: Centrally Sponsored Scheme.
  • Announcement: In the Budget 2025-26.
  • Implementation Period: FY 2025-26 to 2030-31 (extendable up to 2033-34).
  • Focus Areas:
    • Cities as growth hubs.
    • Creative redevelopment of cities.
    • Water and Sanitation.
  • Features:
    • Central Assistance from the UCF
      • 25% of the project cost will be provided as Central Assistance from the UCF.
      • Condition: At least 50% of the project cost must be mobilized through market sources.
      • Sources: Municipal Bonds, Bank Loans, and Public-Private Partnerships (PPP).
      • Projects will be selected through a transparent and competitive Challenge-based system.
    • ₹5,000 Crore Credit Enhancement Fund:
      • To enhance the creditworthiness of 4,223 cities- including Tier-II and Tier-III cities- specifically those accessing market finance for the first time.
    • Credit Repayment Guarantee Sub-scheme:
      • To facilitate access to market finance for the first time for all cities/Urban Local Bodies (ULBs) in the North-Eastern and Hill States, and for small ULBs (<100,000 population) in other States/Union Territories.
      • It will provide a Central Guarantee of up to ₹7 crore or 70 percent of the loan amount (whichever is lower) for loans availed for the first time by Small Urban Local Bodies.
      • Upon the successful repayment of the first loan, a Central Guarantee of up to ₹7 crore or 50 percent of the loan amount (whichever is lower) will be provided.
      • This will effectively support projects of a minimum value of ₹20 crore for the first time in small cities, and projects of up to ₹28 crore for subsequent projects.
  • Scope:
      • All cities with a population of 1 million or more (as per 2025 estimates);
      • The capitals of all States and Union Territories not covered in the above; and
      • Major industrial cities with a population of 100,000 or more.
  • It represents a shift away from traditional grant-based financing towards a market-linked, reform-driven, and outcome-oriented model of urban development.