Context: The Union Cabinet approved the Urban Challenge Fund (UCF) in 2026 to promote market-linked, reform-based urban infrastructure development.
Key Facts:
- Type: Centrally Sponsored Scheme with challenge-based funding model
- Objective: Develop cities as economic growth hubs, enable redevelopment, and improve water & sanitation systems
- Corpus: ₹1 lakh crore central assistance to catalyse ~₹4 lakh crore total investment
- Financing Model: 25% Centre + 50% market finance (mandatory) + 25% State/ULB share
- Fund Mobilisation: Cities must raise market funds via municipal bonds, bank loans, and Public-Private Partnerships (PPPs)
- Approach: Competitive “challenge mode” selection of bankable, reform-oriented projects
- Eligibility: Cities ≥10 lakh population; all State/UT capitals; industrial cities >1 lakh; smaller/hilly/NE ULBs via credit guarantee window
- Duration: FY 2025–26 to FY 2030–31 (extendable)
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