NHB launches ₹ 10000­ cr Urban Infrastructure Development Fund

NHB launches ₹ 10000­ cr Urban Infrastructure Development Fund

Subject : Economy

Section: Monetary Policy

In News:National Housing Bank (NHB) on Sunday said it has operationalised the ₹10,000-crore Urban Infrastructure Development Fund (UIDF) announced in this year’s Budget for creation of urban infrastructure in tier-2 and tier-3 cities.

Key Points:

• The initial corpus for this fund — managed by National Housing Bank (NHB) is ₹10,000 crore. The Urban Infrastructure Development Fund (UIDF) has been launched to supplement efforts of the State governments by providing a stable and predictable source of finance for creation of urban infrastructure in tier-2 and tier-3 cities.
• Union Budget 2023-24 announced the setting up of the UIDF through use of priority sector lending shortfall for creation of urban infrastructure in tier 2 and tier 3 cities.
• Interest rate on UIDF loans has been kept at bank rate minus 1.5 percent i.e.5.25% at present.
• The loan (principal) will be repayable in 5 equal annual installments within 7 years from the date of withdrawal, including a moratorium period of two years while interest will be payable on quarterly basis.
• Eligible projects:
  • Focus will be on basic services like sewerage and solid waste management, water supply and sanitation, construction and improvement of drains/storm water drains, etc. and impact-oriented projects would be prioritised.
  • The minimum size and maximum size of the project proposal shall be ₹5 crores (₹ 1 crore for northeast & hilly States) and ₹ 100 crore respectively.
  • The fund shall not be utilised for any type of maintenance works or for administrative/establishment expenses.
  • Further, housing, power and telecom, rolling stock like buses and trams, urban transport, health and education institutions would remain out of the purview of UIDF.
• Fund allocation:
  • Allocation has been done based on the urban population percentage in respective States/ UTs in the eligible towns/cities out of total population in eligible town/cities in the country.
  • For wider coverage and maximisation of benefit of these low cost funds, States have been advised to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, and to adopt appropriate user charges while accessing the UIDF.
  • The normative allocation of the first tranche of ₹ 10,000 crore under UIDF for 2023-24 has been advised by NHB to States and UTs inviting project proposals under the Fund.