The Union Cabinet has approved the launch of the Urban Challenge Fund (UCF) with a total central assistance of Rs 1 lakh crore, expected to leverage Rs 4 lakh crore in investments across India’s cities over five years under a market-linked programme.

It also cleared the Startup India Fund of Funds 2.0 with a corpus of Rs 10,000 crore, and approved the extension of the metro corridor from Noida Sector 142 to Botanical Garden (Noida), spanning 11.56 kilometre with eight stations.

Under the UCF, central assistance will cover 25% of project costs, provided at least 50% is mobilised from market sources, signalling a shift from grant-based funding to market-linked, reform-driven, outcome-oriented urban infrastructure.

The remaining 25% will be contributed by states, Union Territories, urban local bodies (ULBs), or other sources. The fund aims to create resilient, productive, inclusive, and climate-responsive cities as engines of the next phase of economic growth.
The scheme will run from FY2025-26 to FY2030-31, extendable to FY2033-34, aligning with Budget 2025-26 priorities such as cities as growth hubs, creative redevelopment, and water and sanitation initiatives.

To help smaller cities access market finance, a Rs 5,000-crore Credit Repayment Guarantee Scheme has been approved. It will provide a central guarantee of up to Rs 7 crore or 70% of the loan amount (whichever is lower) for first-time loans, and up to Rs 7 crore or 50% for subsequent loans—supporting projects of at least Rs 20 crore initially and Rs 28 crore thereafter.

Projects will be selected through a challenge-based framework emphasising impact, sustainability, and reform orientation.
The new Startup India Fund of Funds will focus on deep-tech and innovative manufacturing startups, addressing high-risk capital gaps and directing investment to priority sectors critical for self-reliance and growth. It builds on the first Fund of Funds launched in 2016, whose Rs 10,000-crore corpus has been fully utilised. Managed by the Small Industries Development Bank of India (SIDBI), it channels capital into SEBI-registered alternative investment funds that invest in startups through equity and related instruments.

As of December 31, 2025, these AIFs had invested Rs 25,547 crore in 1,371 startups across 29 states and Union Territories.
The Cabinet also cleared five important transport projects. It approved the construction of a 4-lane access-controlled greenfield connectivity from Gohpur on NH-15 to Numaligarh on 715 section, including 15.79 kilometre of road cum rail tunnel under the river Brahmaputra to be developed at a total capital cost of Rs 18,662 crore in Assam on engineering procurement construction (EPC).

It also approved three multitracking projects covering 12 districts across the states of Delhi, Haryana, Maharashtra and Karnataka, increasing the existing network of Indian Railways by about 389 km. The total estimated cost of the projects is Rs 18,509 crore and will be completed by 2030-31.

The rehabilitation and upgrade of the Ghoti-Trimbak (Mokhada)-Jawhar-Manor-Palghar section of NH-160A in Maharashtra on an engineering, procurement and construction (EPC) basis was approved. It entails a total length of 154.635 km and a total capital cost of Rs 3,320.38 crore.

The Dhamasiya-Bitada/ Movi and Nasarpore-Malotha Sections of National Highway-56 to 4-lane standard in Gujarat will be upgraded at a total capital cost of Rs 4,583.64 crore.

Widening of National Highway-167 from Gudebellur to Mahabubnagar on the Hyderabad-Panaji Economic Corridor to 4 lanes in Telangana will be undertaken with a total project length of 80.01 km and total capital cost of Rs 3,175.08 crore, the government said.