The Urban Infrastructure Development Fund (UIDF) was announced in the Union Budget 2023–24 by the Hon’ble Finance Minister as part of the vision for Amrit Kaal. It was launched to strengthen Tier-2 and Tier-3 cities and ensure balanced urban development across India.
UIDF is modeled on the successful Rural Infrastructure Development Fund (RIDF) and is funded by the priority sector lending shortfall of commercial banks. It is managed by the National Housing Bank (NHB) with an initial corpus of ₹10,000 crore.
The fund plays a vital role in creating sustainable and inclusive cities by focusing on basic urban services like water supply, sewerage, sanitation, and solid waste management.
Why was the Urban Infrastructure Development Fund (UIDF) Created?
UIDF was established to address the problem of uneven regional development. While India’s metros are advancing rapidly, smaller cities often lack basic services and planned infrastructure. UIDF bridges this gap by:
- Providing stable financing for states and Union Territories (UTs).
- Supporting Tier-2 and Tier-3 cities in infrastructure creation.
- Promoting balanced urban growth across regions.
- Encouraging planning reforms to create future-ready cities.
How is UIDF Financed and Managed?
The Urban Infrastructure Development Fund (UIDF) is financed and managed in the following way:
- Corpus: The fund started with ₹10,000 crore.
- Funding Source: Financed from the shortfall in Priority Sector Lending (PSL) obligations of commercial banks.
- Managing Agency: The National Housing Bank (NHB) manages UIDF, sanctions loans, and monitors projects.
- Model: UIDF is designed on the lines of RIDF (Rural Infrastructure Development Fund), which has been successfully financing rural projects since 1995-96 through NABARD.
What are Tier-2 and Tier-3 Cities under UIDF?
UIDF targets mid-sized cities, leaving out metropolitan and mega cities.
- Tier-2 cities: Population 1 lakh to less than 10 lakh. (459 towns as per Census 2011)
- Tier-3 cities: Population 50,000 to less than 1 lakh. (580 towns as per Census 2011)
Together, they cover around 40% of India’s urban population.
What are the Objectives of UIDF?
UIDF has the following major objectives:
- Bridge the infrastructure gap in mid-sized cities.
- Provide stable and predictable financing to state governments and ULBs.
- Encourage holistic planning and urban reforms.
- Create sustainable and inclusive cities.
- Promote regional balance by strengthening smaller cities as economic hubs.
Which Agencies can Use UIDF Funds?
UIDF loans are available to:
- Public/State Agencies
- Municipal Corporations
- Urban Local Bodies (ULBs)
- Other state departments involved in infrastructure creation
What Projects are Eligible under UIDF?
UIDF supports projects aligned with Ministry of Housing & Urban Affairs (MoHUA) missions. Eligible activities include:
- Water supply and sanitation systems
- Sewerage and drainage networks
- Solid waste management
- Road construction (excluding maintenance)
- Overbridges, underpasses, grade separators
- Comprehensive area development projects
- Local area plans for decongestion
- Heritage conservation projects
- Town planning schemes for greenfield development
- Parks with open gyms (non-heavy construction)
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What Projects are Not Allowed under UIDF?
UIDF funds cannot be used for:
- Maintenance work
- Housing projects
- Power or telecom projects
- Urban transport projects
- Health or education infrastructure
This ensures that UIDF focuses only on core urban services and impact-oriented projects.
What are the Loan Terms under UIDF?
- Interest Rate: Bank Rate – 1.5% (cheaper than market rates)
- Repayment Period: 7 years (5 annual installments + 2 years moratorium)
- Interest Payment: Quarterly basis
- Loan Limit: Maximum ₹100 crore per project
- DPR Size:
- Minimum: ₹5 crore (₹1 crore for NE & hilly states)
- Maximum: ₹500 crore
How is the UIDF Loan Process Carried Out?
The UIDF loan process will be carried out in the below mentioned way:
- Allocation: NHB allocates funds to states/UTs. Unused funds may be reallocated.
- Application: States/UTs submit DPRs or project summaries on the UIDF portal.
- Sanction: NHB issues sanction letters with terms and conditions.
- Disbursement:
- 20% as mobilization advance (30% for NE & hilly states).
- Remaining on a reimbursement basis.
- Repayment: States repay principal in 5 annual installments.
- Monitoring: NHB monitors via progress reports, on-site inspections, and completion certificates.
How Does UIDF Compare with RIDF?
Detailed comparison between UIDF and RIDF:
| Feature | UIDF | RIDF |
| Established | 2023-24 | 1995-96 |
| Managed by | NHB | NABARD |
| Target Area | Urban (Tier-2 & Tier-3 cities) | Rural areas |
| Funding Source | PSL shortfall of banks | PSL shortfall of banks |
| Eligible Projects | Water, sanitation, waste, roads, heritage | Rural roads, irrigation, health, education |
| Loan Repayment | 7 years (2-year moratorium) | 7 years (2-year moratorium) |
What are the Challenges in Implementing UIDF?
Despite its potential, UIDF faces hurdles such as:
- Low demand from states/UTs due to limited awareness.
- Capacity constraints in Urban Local Bodies (ULBs).
- Delays in project preparation (DPRs).
- Coordination issues between state agencies and ULBs.
- Slow fund utilization in initial years.
What are the Benefits of UIDF?
If implemented effectively, UIDF can:
- Strengthen mid-sized cities as regional economic hubs.
- Reduce pressure on metros by distributing development.
- Provide predictable financing for essential services.
- Encourage urban planning reforms.
- Build sustainable, future-ready cities.
Key Takeaways on UIDF
| Aspect | Details |
| Announced in | Union Budget 2023-24 |
| Managed by | National Housing Bank (NHB) |
| Corpus | ₹10,000 crore |
| Funding Source | Priority Sector Lending shortfall |
| Target | Tier-2 & Tier-3 cities (50,000–9,99,999 population) |
| Eligible Projects | Water, sanitation, solid waste, roads, heritage, planning |
| Excluded Projects | Maintenance, housing, power, telecom, transport, health, education |
| Loan Terms | 7 years (5 installments + 2-year moratorium), Bank Rate – 1.5% |
| Maximum Loan | ₹100 crore per project |
| Monitoring | By NHB (onsite + offsite) |
Also Check:
Questions Based on Urban Infrastructure Development Fund (UIDF)
Q1. UIDF was established in which Union Budget?
a) 2020-21
b) 2021-22
c) 2022-23
d) 2023-24
e) 2024-25
Answer: d) 2023-24
Q2. Which institution manages the UIDF?
a) NABARD
b) SIDBI
c) National Housing Bank
d) RBI
e) Ministry of Finance
Answer: c) National Housing Bank
Q3. UIDF is financed through:
a) Union Government taxes
b) Foreign investments
c) Priority Sector Lending shortfall
d) CSR contributions
e) State Government allocations
Answer: c) Priority Sector Lending shortfall
Q4. What is the maximum loan amount for a project under UIDF?
a) ₹50 crore
b) ₹75 crore
c) ₹100 crore
d) ₹200 crore
e) ₹500 crore
Answer: c) ₹100 crore
Q5. Tier-3 cities under UIDF have a population of:
a) Less than 25,000
b) 25,000 to 50,000
c) 50,000 to less than 1 lakh
d) 1 lakh to less than 10 lakh
e) More than 10 lakh
Answer: c) 50,000 to less than 1 lakh
Q6. Which of the following is not eligible under UIDF?
a) Sewerage system
b) Solid waste management
c) Road overbridges
d) Urban transport projects
e) Heritage conservation
Answer: d) Urban transport projects
Q7. UIDF is modeled after which fund?
a) National Investment Fund
b) RIDF
c) Bharat Nirman Fund
d) PMAY Fund
e) Jal Jeevan Mission Fund
Answer: b) RIDF
Q8. The repayment period of UIDF loans is:
a) 5 years
b) 6 years
c) 7 years
d) 8 years
e) 10 years
Answer: c) 7 years
Q9. Who are the main beneficiaries of UIDF?
a) Private contractors
b) State Governments and ULBs
c) Foreign investors
d) Central Ministries
e) NGOs
Answer: b) State Governments and ULBs
Q10. What is the interest rate for UIDF loans?
a) Bank Rate + 2%
b) Bank Rate – 1%
c) Bank Rate – 1.5%
d) Fixed 5%
e) Fixed 6%
Answer: c) Bank Rate – 1.5%
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