The Union Cupboard, chaired by Prime Minister Narendra Modi, on Thursday accredited the launch of the City Problem Fund (UCF) with a complete Central Help (CA) of Rs 1 trillion to drive market-led city transformation.
CA will cowl 25 per cent of the challenge price, topic to elevating a minimal of fifty per cent of the challenge price from the market.
This may result in a complete funding of Rs 4 trillion within the city sector within the subsequent 5 years, marking a shift in India’s city improvement method from grant-based financing to market-linked, reform-driven and outcome-oriented infrastructure creation.
UCF will leverage market finance, non-public participation and citizen-centric reforms for the supply of high-quality city infrastructure. The fund goals to construct resilient, productive, inclusive and climate-responsive cities, positioning them as key drivers of the nation’s subsequent section of financial progress, a Cupboard assertion issued on Saturday famous.
The fund can be operational from fiscal 12 months (FY) 2026 to FY31, with an extendable implementation interval as much as FY34. “It provides impact to the federal government’s imaginative and prescient introduced within the Price range 2025–26 to implement proposals referring to cities as progress hubs, inventive redevelopment of cities, and water and sanitation.”
A minimal of fifty per cent of challenge financing needs to be mobilised from market sources, together with municipal bonds, financial institution loans and public–non-public partnerships (PPPs). The remaining share could also be contributed by states, Union Territories (UTs), City Native Our bodies (ULBs) or different sources.
Tasks can be chosen by means of a clear and aggressive problem mode, guaranteeing assist for high-impact and reform-oriented proposals. There can be a powerful thrust on reforms throughout city governance, market and monetary methods, operational effectivity and concrete planning.
Non-public sector participation can be inspired by means of structured risk-sharing frameworks and benchmarking of service supply requirements. A devoted Rs 5,000 crore corpus is anticipated to boost the creditworthiness of 4,223 cities, together with tier-II and tier-III cities, significantly for first-time entry to market finance, positioning ULBs as a bankable asset class.
The Centre has additionally accredited a Rs 5,000 crore credit score reimbursement assure scheme to assist smaller cities and ULBs, particularly within the Northeast and hilly states, entry market finance for the primary time. The scheme will present a central assure of as much as Rs 7 crore or 70 per cent of the primary mortgage (whichever is decrease), and 50 per cent for subsequent loans, supporting initiatives of a minimum of Rs 20 crore initially and Rs 28 crore thereafter.
Beneath the fund, initiatives can be chosen by means of a challenge-based framework centered on transformative impression, sustainability and reforms. Funding can be milestone-linked, with continued reforms necessary for additional releases, and monitored by way of a single digital portal.
Key challenge areas embrace growing cities as progress hubs, city redevelopment and local weather resilience, and water and sanitation upgrades. The fund will cowl cities with over 10 lakh inhabitants, all state and UT capitals, main industrial cities, and smaller ULBs by means of the assure scheme.
Funding is tied to governance, monetary, operational and concrete planning reforms, with outlined key efficiency indicators and third-party verification. The initiative goals to catalyse non-public funding, strengthen city governance and speed up future-ready city improvement.
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