Along with the guidelines for the UCF, the guidelines for the Credit Repayment Guarantee Sub-Scheme have also been launched.

• UCF will leverage market finance, private participation and citizen- centric reforms for delivery of high-quality urban infrastructure.

About Urban Challenge Fund 

• Scheme Type: Centrally Sponsored Scheme 
• Fund Allocation: 1 Lakh crore (this will facilitates a total investment of ₹4 lakh crore in next five years)
• Funding pattern: 
  • 25% of the project cost will be provided through the fund.
  • At least 50% must be mobilised from market sources, ensuring private participation.
  • The remaining 25% can be contributed by States/UTs/ULBs or raised from the market.
• Focus areas: Creative development of cities’, Cities as growth hubs’, and Water and sanitation’. 

• Eligible Cities: 
  • All cities with a population of 10 lakh or more (2025 estimates); 
  • All State and Union Territory capitals not covered above; and
  • Major industrial cities with a population of 1 lakh or more.
• Implementation period: FY 2025–26 to 2030–31 (with scope for extension)
• Projects already funded under AMRUT 2.0/ SBM 2.0/ other CSS are not eligible under UCF.

Guiding Principles of UCF Implementation

• Market-linked financing: Requires substantial funding from market sources, with limited central support to ensure fiscal discipline. 
• Challenge-based selection: Projects chosen through a competitive process focusing on impact and reforms. 
• Reform-linked disbursement: Funds released only when governance, financial and planning reforms are undertaken.  
• Outcome-based approach: Funding tied to performance, milestones and measurable results.