Higher Education Financing Agency (HEFA)

Policy Update
Khushi

Background

Higher Education Financing Agency was conceived in India’s 2016-17 union budget to provide financial assistance for the creation of capital assets in premier educational institutions in India. It is registered under Section 8 as a Not-for-profit under the Companies Act 2013 as a Union Govt company and as Non–deposit-taking Systemically Important (NBFC-ND-SI) with Reserve Bank of India (RBI).

It was established on 31st May 2017 and is a joint venture of the Ministry of Education, GoI and Canara Bank with agreed equity participation in the ratio of 90.91% and 09.09% respectively. HEFA’s main motive is to channel market-based finance (including CSR funds and donations) to create capital assets (buildings , libraries ,hostels ,labs ,etc) for the premier institutions of India.

In 2018, the Union Cabinet expanded HEFA’s scope and capital base under the “RISE by 2022” initiative scaling up equity to ₹10,000 crore and directing HEFA to mobilize ₹100,000 crores from markets by 2022. This program, mainly designed to upgrade the Indian research and academic infrastructure to global standards, aims to achieve this without burdening students. Broadly, HEFA was established to supplement central grants with loans for infrastructure, thereby enabling top institutes (IITs, IIMs, IISc, AIIMS, etc.) to attain world-class quality and rankings.

Functioning

HEFA operates as an NBFC‑ND‑SI under RBI, raising capital from government equity, market borrowings, and CSR/donations. Initial equity (₹2,000 crore) was provided by the government (₹1,000 crore in 2016‑17 budget, with further installments) and Canara Bank. All loans disbursed by HEFA are interest-subsidized by the government. Crucially, institutions repay only part or all of the principal from their own revenues, while the Centre meets 100% of interest costs (via budget grants). Under the RISE scheme there are five financing windows for different categories of institutions :

Older Technical Institutes (>10 years): Repay 100% of principal from internal funds; 100% of interest serviced by Government.
Mid‑age Technical Institutes (2008–2014): Repay 25% of principal; Government pays 75% principal + 100% interest.
Central Universities (pre‑2014): Repay 10% of principal; Government covers 90% principal + all interest.
New Institutions (post‑2014) and specified central schools/AIIMS/KVs/NVS: Government fully services principal and interest (effectively a grant).
MoHFW Grant‑in‑Aid Institutions: Sponsoring ministries commit to full repayment of principal and interest via their budget (OH‑31).

HEFA provides financial assistance exclusively to centrally funded institutions across higher education, school education, and the health sector (HEFA, 2024; PIB, 2023). Governed by the Ministry of Education, which also provides interest subsidies, HEFA operates through a loan model wherein institutions repay the principal from their internal budgets via escrow accounts, while the government services the interest (HEFA, 2024).

This approach securitizing future budget flows offers interest-free capital for infrastructure without burdening students. HEFA raises funds mainly through government guaranteed market borrowings and equity, supported by a significant public investment that reached ₹6,000 crore in 2018 (Ministry of Education, 2023).

Performance

HEFA’s loan portfolio spans a wide cross-section of India’s leading publicly funded academic institutions. By March 2025, the agency had sanctioned approximately ₹43,438 crore across 109 institutions, with disbursements amounting to ₹22,600.84 crore. This includes 22 Indian Institutes of Technology (IITs), 17 National Institutes of Technology (NITs), 8 Indian Institutes of Management (IIMs), 32 Central Universities, 12 All India Institutes of Medical Sciences (AIIMS), and 18 others, such as IISERs, IIITs, and UGC-funded universities. Reflecting its pan-India reach, HEFA supports institutions across all states without enforcing state-wise quotas.

Parliamentary data from March 2024 shows similar trends, with ₹39,720 crore sanctioned for 103 institutions, and nearly half of that amount ₹19,968 crore already disbursed. Notably, the 22 IITs and 12 AIIMS alone accounted for about 64% of the total loan sanctions, underscoring their centrality in HEFA’s infrastructure mission. The remaining funds are distributed among IIMs, NITs, and central universities, contributing to a balanced national footprint.

HEFA’s structure, which covers interest payments through central grants, significantly lowers the repayment burden on institutions, particularly those in the first funding window, which are responsible only for repaying the principal. The agency has consistently sanctioned projects well beyond its initial equity base. For instance, by mid-2018, projects worth over ₹10,000 crore had already been approved, even with disbursements still in progress.

Although HEFA’s original goal of mobilizing ₹100,000 crore by 2022 remains unmet, several structural and operational hurdles contributed to this gap. These include delayed project proposals from institutions, capacity constraints in preparing viable infrastructure plans, administrative bottlenecks in loan processing, and underutilization of funds by some sanctioned entities. Additionally, certain institutes hesitated to take on even principal-only repayment commitments without clearer long-term revenue projections. Despite these challenges, the pace of approvals has steadily increased under the RISE initiative, reflecting growing awareness and confidence in HEFA’s financing model.

Overall, HEFA has positioned itself as a key non-banking financial intermediary, effectively complementing traditional grants by enabling institutions to undertake large-scale, capital-intensive projects essential for academic and research excellence.

Impact

HEFA’s loan-based model has already begun to reshape the infrastructure landscape of India’s premier academic institutions. Notably, in 2017, the agency approved loans worth ₹2,066.73 crores to six leading institutions including IIT Bombay, Delhi, Madras, Kharagpur, Kanpur, and NIT Surathkal to modernize research laboratories and allied infrastructure. These strategic investments are aimed at strengthening research output and improving global institutional rankings.

The Ministry of Education emphasized that such upgrades would help retain top talent within India and potentially attract researchers from abroad (Ministry of Education, 2017). Unlike traditional grant mechanisms, HEFA enables high-impact projects by combining market-based financing and CSR contributions.Its core mission, to help top Indian institutions “excel and reach the top in global rankings” is advanced through both market-based financing and the mobilization of CSR contributions .

Institutions such as the older IITs and IISc have used HEFA funds to build cutting-edge labs, smart libraries, and technology hubs. Similarly, central universities like Delhi and Hyderabad have initiated campus expansions, while AIIMS and newly established IIITs have completed permanent infrastructure through fully serviced loans under the RISE initiative. Though long-term impact data is still emerging, HEFA’s role in accelerating infrastructure growth is aligned with the National Education Policy (NEP) 2020 vision of research-driven excellence.

References

1. Higher Education Financing Agency. (n.d.). About HEFA: Objectives, financing model, and operations. https://www.hefa.co.in/

2. Ministry of Education. (n.d.). Higher Education Financing Agency (HEFA). Government of India. https://www.education.gov.in/

3. Press Information Bureau. (2023, March 28). HEFA loans sanctioned for infrastructure development in higher education institutions. Government of India. https://www.pib.gov.in/

4. Digital Learning. (2017, November 8). HEFA sanctions ₹2,066.73 crore to six premier institutes for research infrastructure. Elets Technomedia. https://digitallearning.eletsonline.com/

About the Contributor

Khushi is currently pursuing her third year of B.A. (Hons.) in Economics from Panjab University, Chandigarh. She is affiliated with IMPRI as a Research Intern, with a keen interest in public policy, education, and development economics.