**Executive Summary**
On April 15, 2026, the Union Minister for Housing and Urban Affairs launched the Operational Guidelines for the ₹1 Lakh Crore Urban Challenge Fund (UCF) and the Credit Repayment Guarantee Sub-Scheme (CRGSS). The initiative seeks to catalyze ₹4 Lakh Crore in total urban investments between FY 2025–26 and FY 2030–31, focusing on making Tier-II and Tier-III cities investment-ready. The program emphasizes market-based financing and financial discipline to transform urban infrastructure across India.
**Key Points / Main Content**
**Financial Structure and Allocation**
* **Total Outlay:** The UCF provides ₹1 Lakh Crore in Central Assistance to mobilize approximately ₹4 Lakh Crore through market-based financing.
* **Funding Caps:** Central Assistance is limited to 25% of the total project cost.
* **Market Mobilization:** At least 50% of project funding must be sourced through municipal bonds, bank loans, and public-private partnerships (PPPs).
* **Budgetary Breakdown:** ₹90,000 crore is earmarked for projects, ₹5,000 crore for project preparation and capacity building, and ₹5,000 crore for the CRGSS.
**Credit Repayment Guarantee Sub-Scheme (CRGSS)**
* **Target Areas:** Focuses on enabling smaller cities, Tier-II and Tier-III cities, and cities in hilly or North-Eastern regions to access credit.
* **Function:** Provides credit guarantees to facilitate access to market-based financing for entities that may otherwise struggle to secure investment.
**Sectoral Focus and Project Criteria**
* **Priority Sectors:** Support is directed toward the redevelopment of old city areas/markets, urban mobility, last-mile connectivity, non-motorised transport, water and sanitation infrastructure, and climate-resilient development.
* **Project Standards:** The fund prioritizes "bankable" projects that are scalable, impactful, and capable of delivering long-term economic and social benefits.
**Implementation Framework**
* **E-directory:** A new digital directory links cities with financial institutions, banks, and credit rating agencies to facilitate funding.
* **Collaborative Agreements:** Digital MoUs were signed between the Ministry and all States, alongside Letters of Intent (LoIs) with academic institutions, banks, NBFCs, and private sector entities.
* **Timeline:** The UCF is scheduled for implementation from FY 2025–26 to FY 2030–31.
**Impact Analysis**
**State Governments**
**Impact**
States are positioned as primary partners in a new paradigm of urban development that shifts from grant-based funding to investment-led growth.
**Action Required**
States must honor the signed MoUs and collaborate with the Centre and Urban Local Bodies to ensure the effective implementation of reforms and project execution.
**Urban Local Bodies (ULBs) / Cities**
**Impact**
Cities, particularly Tier-II and Tier-III, gain access to significant capital but are subject to stricter financial discipline and the need for fiscal robustness.
**Action Required**
ULBs must strengthen their financial capacity, adopt institutional reforms, and develop bankable project proposals to attract market-based financing.
**Financial Institutions and Private Sector Entities**
**Impact**
Increased opportunities for banks, NBFCs, and private investors to participate in urban infrastructure through loans, municipal bonds, and PPPs, supported by a credit guarantee framework.
**Action Required**
Stakeholders should utilize the newly launched e-directory to connect with cities and engage in the execution of urban transformation projects as outlined in the signed Letters of Intent.
Key Entities Referenced
Urban Challenge Fund (UCF): A ₹1 lakh crore catalytic fund designed to mobilize ₹4 lakh crore in urban infrastructure investments through market-based financing.
Credit Repayment Guarantee Sub-Scheme (CRGSS): A ₹5,000 crore sub-scheme within UCF that provides credit guarantees to help smaller cities access market-linked financing.
Ministry of Housing & Urban Affairs: The primary central ministry responsible for the formulation of operational guidelines and the overall implementation of the Urban Challenge Fund.
Shri Manohar Lal: The Union Minister for Housing and Urban Affairs who launched the fund and its operational guidelines.
Tier-II and Tier-III Cities: The specific urban categories and geographical focus areas prioritized for investment and financial sustainability reforms under the policy.
Ministry of Housing & Urban Affairs
Union Minister Shri Manohar Lal Launches
Operational Guidelines for Urban Challenge Fund
₹1 Lakh Crore UCF to Catalyse ₹4 Lakh Crore Urban
Investments; Focus on Tier-II & Tier-III Cities
Credit Repayment Guarantee Sub-Scheme to Enable Smaller
Cities Access Market-Based Financing
Fund will support transformative projects across key sectors
such as redevelopment of old city areas and markets, urban
mobility and last-mile connectivity, non-motorised transport,
water and sanitation: Shri Manohar Lal
Posted On: 15 APR 2026 3:00PM by PIB Delhi
Union Minister for Housing and Urban Affairs Shri Manohar Lal today 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 step towards transforming urban infrastructure financing in
the country.
Representatives from various States including Madhya Pradesh, Gujarat and Odisha participated in the
event. The Chief Minister of Madhya Pradesh, Shri Mohan Yadav, and the Chief Minister of Odisha, Shri
Mohan Charan Majhi, addressed the gathering through video messages.
Addressing the gathering, Shri Manohar Lal stated that the Urban Challenge Fund represents a
paradigm shift in India’s approach to urban development. He emphasized that the Fund is not merely
about providing grants but about leveraging public funds to catalyse significantly larger investments and
making cities financially robust and investment-ready.
The Minister highlighted that India’s cities are emerging as engines of economic growth, innovation and
employment generation. Achieving the vision of Viksit Bharat @2047 will depend on how effectively
cities are planned, financed and governed. He noted that while initiatives such as AMRUT, Swachh Bharat
Mission and Smart Cities Mission have strengthened urban infrastructure, the next phase requires cities to
become investment-ready and financially sustainable.The Minister underlined that the Urban Challenge Fund, with a total Central Assistance of ₹1 lakh crore,
is designed as a catalytic instrument to mobilise nearly four times the investment through market-based
financing. He stated that Central Assistance will be limited to 25% of project cost, while at least 50% offunding will be mobilised through municipal bonds, bank loans and public-private partnerships, thereby
ensuring financial discipline and encouraging private participation.
The Minister further informed that out of the total outlay, ₹90,000 crore 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 will particularly benefit smaller cities, including Tier-II and Tier-III
cities and cities in hilly and North-Eastern regions, by enabling them to access market-based financing
through credit guarantees.
Shri Manohar Lal emphasised that the Fund will support transformative projects across key 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 focus, he
noted, will be on scalable, impactful and bankable projects that can deliver long-term economic and social
benefits.
Highlighting the role of Urban Local Bodies (ULBs), the Minister said that cities will be encouraged to
strengthen their financial capacity, adopt reforms and actively participate in market-based financing
mechanisms. He urged States and ULBs to view the Urban Challenge Fund not just as a scheme but as an
opportunity to build globally competitive, resilient and investment-ready cities.
Secretary, Ministry of Housing and Urban Affairs, Shri Srinivas Katikithala, in his remarks, stated
that India’s urbanisation is entering a decisive phase. Urban Challenge Fund introduces a market-linked,
reform-driven and outcome-oriented framework for urban infrastructure development.
He highlighted that the Fund aligns infrastructure creation with financial sustainability and institutional
strengthening, while placing strong emphasis on project bankability and fiscal discipline.
He further noted that the success of the Urban Challenge Fund will depend on sustained collaboration
between the Centre, States and Urban Local Bodies, along with effective implementation of reforms and
capacity building initiatives.
An e-directory linking cities with financial institutions, banks and credit rating agencies was also
launched on the occasion to facilitate effective implementation of UCF.
The event also witnessed the digital signing of a Memorandum of Understanding (MoU) between the
Ministry of Housing and Urban Affairs and all States, reaffirming a collaborative commitment towards the
effective implementation of the Urban Challenge Fund.
In addition, Letters of Intent (LoIs) were digitally signed with key stakeholders, including knowledge
partners such as academic and research institutions and capacity building centres, financial institutions
comprising banks, NBFCs, international financial institutions, credit rating agencies and merchant
bankers, as well as private sector entities, marking a significant step towards fostering a comprehensive
ecosystem for financing, capacity building and execution of urban transformation projects.
The Urban Challenge Fund will be implemented from FY 2025–26 to FY 2030–31, aiming to transform
the cities into new growth hubs and drivers of India’s urban future.
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SK
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