India’s booming private university sector bears an uncanny resemblance to the reckless expansion that triggered the 2018 NBFC (Non-Banking Financial Company) collapse.
This time, however, the toxic assets aren’t bad loans, but the futures of millions of students. What was once celebrated as educational liberalization now shows troubling signs of becoming a speculative bubble, one that risks leaving a generation stranded with worthless degrees and significant debt.
The Unchecked Expansion: A Policy Shift’s Perilous Legacy
Since 2014, India has seen the approval of over 150 private universities under progressively liberalized norms, a policy shift aimed at increasing access to higher education.
A pivotal change came with the University Grants Commission (UGC)’s 2016 amendment, which reduced the requirement for “deemed-to-be-university” status from 10 years of operation to just five. This regulatory loosening triggered a staggering 153% increase in private universities, compared to a mere 12% rise in public institutions over the same period.
However, the rapid proliferation has come at a steep cost. According to a report, a distressing 40% of these private universities now report enrolment below 500 students, falling significantly short of the financial viability benchmarks. This underperformance hints at a systemic problem: universities existing more on brochures and land registries than on vibrant campuses with thriving academic programs.
As one expert lamented,
“What happens when a university exists more on brochures than on campuses, more in land registries than in lecture halls? In India’s rapidly expanding private higher education sector, this question is no longer hypothetical, it is structural.”
The financial stress is not merely theoretical; it is accumulating into a substantial crisis. The Reserve Bank of India reports that the education sector has amassed over ₹9,200 crore (approximately $1.1 billion USD) in non-performing assets (NPAs), with private universities contributing nearly 60% to this alarming figure.
It is further noted that one in three private institutions carries debt exceeding five times their EBITDA, a clear red flag for solvency. Private university enrollments have declined by about 4% annually since 2020, leading to a dangerous dependency on exorbitant tuition fees and aggressive asset-based revenue streams.
Beyond Education: The Real Estate Play and Regulatory Gaps
The underlying issue is often a profound distortion of mission: the core business of education is being overshadowed by real estate speculation and other non-educational ventures. A stark example comes from a private university in Uttar Pradesh, which acquired 250 acres of land in 2015 at ₹1 lakh per acre under state policies.
Today, that same land is valued at ₹2 crore per acre due to nearby infrastructure projects, effectively transforming an educational endeavor into a lucrative land bank. Disturbingly, this institution operates with fewer than 400 enrolled students, functioning at under 10% of its declared capacity.
This is not an isolated incident. Publicly available financial reports of some large education groups indicate that up to 85% of their revenue stems from non-education ventures, such as hospitality and retail, revealing a deep diversion from their primary purpose.
Adding to the crisis are institutions that exist primarily on paper, benefiting from lax oversight. Pragyan International University, granted recognition by the Jharkhand legislature in 2016, never established a campus and was subsequently delisted by the UGC in 2025.
Similarly, Eastern Institute for Integrated Learning in Management (EIILM) in Sikkim was shut down after a UGC investigation revealed gross irregularities. Even more egregious, Dnyaneshwar Vidyapeeth in Pune was declared illegal by the Bombay High Court in 2005, having operated for years from residential buildings and issuing thousands of unrecognized degrees.
These examples underscore a broader regulatory failure. Unlike the market regulator SEBI, which imposes strict compliance rules on NBFCs including credit ratings, investor disclosures, and contingency reserves, the UGC currently lacks mandatory mechanisms for periodic financial disclosures, enrolment-linked accreditation, or emergency student protection protocols.
The National Education Policy (2020) sets ambitious targets for gross enrolment, yet without robust safeguards, the risk of institutional failure grows proportionally.
Protecting Futures: Lessons from the NBFC Crisis and the Path Forward
The closure of a university in Andhra Pradesh in 2022, which stranded over 1,200 students mid-degree with no refunds, transitions, or accountability, vividly illustrates the human cost of this misgovernance.
The lesson from the NBFC crisis is clear: unchecked expansion coupled with poor oversight leads to systemic collapse. In finance, this leads to liquidity crises and investor panic. In education, it translates into wasted years, lost earnings, and eroded social trust for millions of students.
The comparison with NBFCs is not just rhetorical; it is diagnostic. Both sectors involve risk intermediation, rely on public confidence, and are systemically important. India can no longer afford to treat education as a speculative venture.
The need for student-centric regulation, rigorous financial transparency, and operational accountability has never been more urgent.
Experts advocate for a framework similar to SEBI’s, which could include the creation of “Student Protection Bonds.” This would require universities operating at less than 60% enrollment to set aside 10% of annual revenues in an escrow fund, ensuring funds are available for tuition refunds, transfer support, and data preservation in case of closure.
Moreover, just as SEBI assigns institutional ratings, the UGC or a parallel accreditor should develop a public university rating system based on financial solvency, student retention, and governance metrics. If markets need protection for investors, surely classrooms need protection for learners.