Cabinet approves ₹1 lakh crore Urban Challenge Fund to drive market-led urban transformation
The Union Cabinet chaired by Prime Minister Narendra Modi approved the Urban Challenge Fund with Central Assistance of ₹1 lakh crore on 13 February 2026, expected to unlock ₹4 lakh crore of urban investment over five years.
Summary
The Union Cabinet chaired by Prime Minister Narendra Modi approved the Urban Challenge Fund (UCF) with Central Assistance of ₹1 lakh crore on 13 February 2026; the decision was announced on 14 February. Central Assistance will cover 25% of a project's cost, provided at least 50% is raised from the market through municipal bonds, bank loans or PPPs. This is expected to lead to a total urban investment of ₹4 lakh crore in five years. The Fund runs from FY 2025-26 to FY 2030-31, extendable to FY 2033-34, and gives effect to the Budget 2025-26 proposals on Cities as Growth Hubs, Creative Redevelopment of Cities, and Water and Sanitation. Projects will be chosen in challenge mode. A ₹5,000 crore Credit Repayment Guarantee Scheme will help smaller cities and those in Northeastern and hilly states raise their first loans, with a central guarantee of up to ₹7 crore or 70% of the loan, whichever is lower.
Key facts
- Approved
- 13 February 2026 (announced 14 February)
- Central Assistance
- ₹1 lakh crore; 25% of project cost
- Market share
- At least 50% from market sources
- Total investment
- ₹4 lakh crore in five years
- Period
- FY 2025-26 to FY 2030-31, extendable to FY 2033-34
- Guarantee
- ₹5,000 crore scheme; up to ₹7 crore or 70% of first loan
Practice MCQs 3 questions
What is the total Central Assistance under the Urban Challenge Fund approved by the Cabinet in February 2026?
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Correct answer: D — ₹1 lakh crore
The Central Assistance is ₹1 lakh crore; it is expected to unlock total investment of ₹4 lakh crore.
Under the Urban Challenge Fund, Central Assistance covers what share of project cost, subject to a minimum share being raised from the market?
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Correct answer: A — 25% CA; at least 50% from market
Central Assistance covers 25% of the project cost, subject to at least 50% being raised from the market.
Consider the following statements about the Urban Challenge Fund: 1. It gives effect to proposals announced in the Union Budget 2025-26, including Cities as Growth Hubs. 2. Its Credit Repayment Guarantee Scheme offers a central guarantee of up to ₹7 crore or 70% of a first-time loan, whichever is lower. Which of the above is/are correct?
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Correct answer: C — Both 1 and 2
Both are correct. The UCF implements the Budget 2025-26 vision on Cities as Growth Hubs, Creative Redevelopment and Water and Sanitation, and the ₹5,000 crore guarantee scheme covers up to ₹7 crore or 70% of a first loan.