Manohar Lal Launches Urban Challenge Fund Guidelines

21 Apr 2026 CW Team

The minister emphasised that the Urban Challenge Fund is intended as a catalytic instrument rather than a mere grant mechanism, designed to leverage public funds to mobilise larger market investments and to make cities financially robust and investment ready. He linked the initiative to the broader vision of Viksit Bharat 2047 and said that earlier schemes had strengthened infrastructure but the next phase requires fiscal sustainability and bankability.

Central Assistance under the Fund was announced at Rs1 trillion (Rs1 tn), with central support limited to 25 per cent of project cost and at least 50 per cent of funding to be sourced through municipal bonds, bank loans and public?private partnerships. Of the total outlay, Rs900 billion (Rs900 bn) is earmarked for projects, Rs50 billion (Rs50 bn) for project preparation and capacity building, and Rs50 billion (Rs50 bn) for the Credit Repayment Guarantee Sub?Scheme, which will help smaller tier?II and tier?III cities and hilly and north?eastern areas access market finance through credit guarantees.

The Fund will support projects in 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, prioritising scalable and bankable proposals with long?term benefits. Urban Local Bodies will be encouraged to strengthen financial capacity, adopt reforms and engage with market?based financing. An e?directory linking cities with banks, financial institutions and credit rating agencies was launched and a digital memorandum of understanding with states along with letters of intent with stakeholders were signed to operationalise the Fund from FY 2025?26 to FY 2030?31.

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Union Minister for Housing and Urban Affairs Manohar Lal launched the operational guidelines for the Urban Challenge Fund and the Credit Repayment Guarantee Sub?Scheme in New Delhi on April 15. Representatives from states including Madhya Pradesh, Gujarat and Odisha attended, while the chief ministers of Madhya Pradesh and Odisha addressed the gathering via video messages. The minister emphasised that the Urban Challenge Fund is intended as a catalytic instrument rather than a mere grant mechanism, designed to leverage public funds to mobilise larger market investments and to make cities financially robust and investment ready. He linked the initiative to the broader vision of Viksit Bharat 2047 and said that earlier schemes had strengthened infrastructure but the next phase requires fiscal sustainability and bankability. Central Assistance under the Fund was announced at Rs1 trillion (Rs1 tn), with central support limited to 25 per cent of project cost and at least 50 per cent of funding to be sourced through municipal bonds, bank loans and public?private partnerships. Of the total outlay, Rs900 billion (Rs900 bn) is earmarked for projects, Rs50 billion (Rs50 bn) for project preparation and capacity building, and Rs50 billion (Rs50 bn) for the Credit Repayment Guarantee Sub?Scheme, which will help smaller tier?II and tier?III cities and hilly and north?eastern areas access market finance through credit guarantees. The Fund will support projects in 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, prioritising scalable and bankable proposals with long?term benefits. Urban Local Bodies will be encouraged to strengthen financial capacity, adopt reforms and engage with market?based financing. An e?directory linking cities with banks, financial institutions and credit rating agencies was launched and a digital memorandum of understanding with states along with letters of intent with stakeholders were signed to operationalise the Fund from FY 2025?26 to FY 2030?31.

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