Source: HT
Subject: Government Scheme
Context: Union Minister launched the Operational Guidelines for the Urban Challenge Fund (UCF) and the Credit Repayment Guarantee Sub-Scheme (CRGSS) to revolutionize urban infrastructure financing.
About Urban Challenge Fund (UCF):
What it is?
- The Urban Challenge Fund is a market-linked, reform-driven, and outcome-oriented catalytic instrument. Unlike traditional grant-based schemes, it uses limited central assistance to de-risk projects, encouraging cities to access market-based financing and private investments for large-scale urban transformation.
Implementation Period: FY 2025–26 to FY 2030–31.
Nodal Ministry: Ministry of Housing and Urban Affairs (MoHUA).
Aim:
- To transform cities into investment-ready, financially sustainable growth hubs.
- To mobilize private capital and market-based financing for urban infrastructure.
- To support the vision of Viksit Bharat @2047 by improving urban planning and governance.
Key Features:
- Catalytic Outlay: A total Central Assistance of ₹1 lakh crore, designed to mobilize nearly ₹4 lakh crore (4x leverage) in total investments.
- Funding Ratio: Central Assistance is limited to 25% of the project cost. At least 50% of funding must be mobilized through municipal bonds, bank loans, and Public-Private Partnerships (PPPs).
- Fund Allocation:
- ₹90,000 crore: Direct project funding.
- ₹5,000 crore: Project preparation and capacity building.
- ₹5,000 crore: Credit Repayment Guarantee Sub-Scheme (CRGSS).
- Credit Repayment Guarantee Sub-Scheme (CRGSS): A dedicated sub-scheme to help Tier-II and Tier-III cities, as well as those in hilly and North-Eastern regions, access credit by providing guarantees to lenders.
- Focus Sectors:
- Redevelopment of old city areas and traditional markets.
- Urban mobility, last-mile connectivity, and non-motorized transport.
- Water, sanitation, and climate-resilient infrastructure.
- Challenge-Based Selection: Funding is linked to the bankability of projects and the implementation of specific urban reforms by ULBs.
- Digital Tools: Launch of an e-directory linking cities with financial institutions and credit rating agencies to facilitate seamless deal-making.
Significance:
- By requiring cities to borrow from markets, the fund enforces fiscal responsibility and better accounting practices within ULBs.
- Through the CRGSS, it bridges the credit gap for smaller cities that typically struggle to issue municipal bonds or secure bank loans.
