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NIT-K among six institutes to get over ₹2,000 cr. interest-free loan

The other institutes are the IITs of Mumbai, Delhi, Chennai, Kharagpur and Kanpur

The National Institute of Technology – Karnataka (NIT-K), Surathkal, is among six institutions in the country to which the Higher Education Funding Agency (HEFA) approved ₹2,066.73 crore interest free loan on Wednesday.

The funding would be for research and related infrastructure in addition to grants being given to these institutions. The approval was given in the second meeting of the HEFA Board on November 29. The other five institutes are the Indian Institutes of Technologies (IITs) of Mumbai, Delhi, Chennai, Kharagpur and Kanpur.

“...The HEFA Board in its second meeting today approved projects for ₹2,066.73 crore for six institutions...,” a release from the Press Information Bureau said. “...These funds would be used to improve the research infrastructure in these institutions to further improve their standing at the global level...As per the scheme, HEFA would mobilis ₹20,000 crore through market borrowing and would release the same to the government institution as interest- free loans...,” it added.

Novel funding method

The HEFA is a novel method of funding premier institutions through ‘securitising the future flows’. Each institution agrees to escrow a specific amount from their internally earned resources (not government grants) to HEFA. This forms a basis for a credit line which can be used by the institution for creating the required capital and research assets. The principal portion is repaid from the escrowed amount and the interest is met by the government. For the institution, this is an interest-free amount and gives facility to the institution to build the required research infrastructure of world class.

The HEFA has registered as a Section – 8 Company under the Companies Act on May 31, 2017. Canara Bank has been identified as the partner for setting up the Company. Government has released ₹250 crore equity and the Canara Bank has given ₹50 crore equity in the HEFA. RBI has granted a license under the RBI Act for HEFA to operate as NBFC on November 21, 2017, and to leverage the equity to mobilise money from market as per the requirements of the institutions.