Canara Bank has announced that it will partner with Human Resource and Development (HRD) Ministry for the establishment of Higher Education Funding Agency (HEFA). The major aim with such initiative is to give a boost to infrastructure development in premier institutions such as NIITs, IISERs and other central universities.
The entire process to select an institution for HEFA was based upon the process such as inviting, examining and selection after which a “Notice of Expression of Interest for identifying a Joint Venture partner for establishment of HEFA” was carried out by the HRD ministry.
According to the sources of the bank, the Bank has initiated steps in this direction to operationalize the HEFA subject to necessary approvals and permissions from the government and Regulators.
It has already been revealed by the government sources from HRD ministry last month that HEFA would be promoted by the identified promoters and HRD ministry with an authorised budget of Rs 2000 crore, out of which 1000 crore would come out of government equity.
The crux of the job of HEFA would be to act as a special purpose vehicle which can leverage the equity to raise up to Rs.20,000 crore for funding projects for infrastructure as well as development of world-class labs in IITs, IIMs, NITs and other similar institutions, according to a statement by the Bank.
The financing of the projects would come through a 10-year loan. According to the sources, “The principal portion of the loan will be repaid through the ‘internal accruals’ (earned through the fee receipts, research earnings etc.,) of the institutions.” The part of funding would be achieved through the government which would service the interest portion through regular plan assistance.
According to a statement released by the bank, “all centrally funded institutions would be eligible for becoming a member of HEFA and this secured future flows for the institutes would be securitised by the HEFA for mobilising the funds from the market. Each member institution would be eligible for a credit limit as decided by HEFA based on the amount agreed to be escrowed from the internal accruals.”
The establishment of the HEFA comes when there is an acute shortage of funding in higher education sector in the country, which is also one of the reasons for a very dismal performance by Indian universities in the latest world ranking of universities.