Agency set up to give loans to IITs, IIMs

The human resource development ministry and Canara Bank have set up an agency to fund creation of infrastructure and research facilities at higher education institutes.

The government said the Higher Education Financing Agency (HEFA) has been authorised to raise up to ~20,000 crore to give loans for specific needs of the Indian Institutes of Management (IIMs), Indian Institutes of Technology (IITs), Indian Institutes of Science Education and Research (IISERs) and the National Institutes of Technology (NITs).

The joint venture between the Centre and Canara Bank was set up with an authorised capital of ~2,000 crore. The Centre has put ~1,000 crore and Canara Bank ~100 crore for the moment.

The financing model is such that the Centre, which decided to set up the agency eight months ago, will pay interest on the amount borrowed by the institutes.

“We got approval of the registrar of companies on May 31. The next step is to take an NBFC (non-banking finance company) licence from the Reserve Bank of India. We are hopeful that HEFA would be operational from August 15,” a senior government official said.

The HEFA board will be headed by the secretary of higher education, K K Sharma. The ministry has also appointed IITMadras director Bhaskar Ramamurthi and IIM-Indore director Rishikesha T Krishnan as directors on the seven-member board. Canara Bank nominated its executive director, P V Bharathi and deputy general manager, U Govardhan. Independent directors are Ashok Mishra, former director of IIT-Bombay, and University Grants Commission member, V S Chauhan. U Govardhan has been made the chief executive officer on a non-rotational basis, meaning the management control of the company will vest with Canara Bank.

The government has called HEFA’s first board meeting on Monday, where the modalities on its functioning would be decided. Rakesh Sharma, managing director of Canara Bank, said HEFA would raise money through tax-free bonds. The government might give tax exemption to the corporate social responsibility contributions of companies and public sector undertakings to HEFA. Fundraising might pose a challenge as the markets had not shown any interest to a similar set-up, called the National Investment and Infrastructure Fund (NIIF), for enhancing infrastructure financing.

The NIIF was set up with a targeted fund of ~40,000 crore, of which 51 per cent was to come from foreign and domestic investors. The government’s contribution was 49 per cent. Investment in the fund has been zero.