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Informist, Saturday, Feb. 14, 2026

 

--Cabinet OKs INR 1 tln for Urban Challenge Fund

 

NEW DELHI – The Union Cabinet Friday approved the launch of Urban Challenge Fund, which was first announced in the Budget for 2025-26 (Apr-Mar), with a total central government assistance of INR 1 trillion. The INR 1 trillion will cover 25% of the project cost, subject to raising minimum 50% of the project cost from market, Information and Broadcasting Minister Ashwini Vaishnaw said Saturday.

 

"This will lead to a total investment of Rs. Four lakh crore (INR 4 trillion) in urban sector in next five years, marking a paradigm shift in India's urban development approach from grant-based financing to market-linked, reform-driven and outcome-oriented infrastructure creation," Vaishnaw said, announcing the Cabinet's decision. "The Urban Challenge Fund will leverage market finance, private participation and citizen-centric reforms for delivery of high-quality urban infrastructure."

 

The fund will be operational from FY26 to FY31, with an extendable implementation period up to FY34, and will cover proposals relating to cities as growth hubs, creative redevelopment of cities, and water and sanitation.

 

Under the fund, a minimum of 50% of project financing has to be mobilised from market sources, including municipal bonds, bank loans and public–private partnerships, the government said in a release. The remaining share may be contributed by states, union territories, urban local bodies or other sources.

 

The projects will be selected through a transparent and competitive challenge mode, ensuring support to high-impact and reform-oriented proposals. There will also be a strong thrust on reforms across urban governance, market and financial systems, operational efficiency, and urban planning. "Private sector participation will be encouraged through structured risk-sharing frameworks and benchmarking of service delivery standards," the release said.

 

The government also said that a dedicated corpus of INR 50 billion will enhance the creditworthiness of 4,223 cities including tier-II and tier-III cities, particularly for first-time access to market finance. The Urban Challenge Fund will position urban local bodies as 'bankable asset class', according to the government.  End

 

Reported by Priyasmita Dutta

Edited by Ashish Shirke

 

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