NEWS – The Urban Infrastructure Development Fund (UIDF) was established to address urban infrastructure needs in Tier-2 and Tier-3 cities. It is funded through the priority sector lending shortfall, ensuring resources for infrastructure development in these cities.

HIGHLIGHTS

Objective and Purpose

• UIDF aims to supplement the efforts of State Governments, Union Territories (UTs), and local bodies in enhancing urban infrastructure.
• It supports the development of essential services such as:
  • Sewerage and Solid Waste Management
  • Water Supply and Sanitation
  • Construction and Improvement of Drains/Storm Water Drains

Key Features of UIDF

• Managed by National Housing Bank: The fund is administered by the National Housing Bank (NHB), ensuring professional management and oversight.
• Initial Corpus: The initial corpus of UIDF is ₹10,000 crore, which will be utilized to support urban infrastructure projects.
• Replicates Rural Infrastructure Development Fund: The UIDF is set up on the lines of the Rural Infrastructure Development Fund (RIDF), leveraging similar mechanisms to boost infrastructure in urban areas.

Coverage of UIDF

• UIDF currently covers 459 Tier-2 cities and 580 Tier-3 cities, focusing on cities that are underdeveloped in terms of urban infrastructure.
• States are encouraged to leverage additional resources from:
  • Grants of the 15th Finance Commission
  • Existing Government Schemes
• States should also adopt appropriate user charges when accessing funds from UIDF to ensure sustainability.

UIDF Loans

• Interest Rate: The interest rate on UIDF loans is set at Bank Rate minus 1.5%, making it an attractive financing option for urban infrastructure projects.
• Repayment Period: The loan principal will be repayable in five equal annual instalments within seven years, with a moratorium period of two years.
• Interest Payment: The interest on the loan will be paid on a quarterly basis.