Educational institutions have been barred from erecting barriers to students switching colleges.
Most educational institutions dissuade students from quitting after having been admission to courses by not releasing their original certificates and forfeiting the fee already paid.
The government on Tuesday ordered the University Grants Commission and the All India Council of Technical Education to dismantle them.
The two regulatory bodies have been told to direct institutes, universities and deemed to be universities to give students a full refund and only retain a processing fee of Rs 1,000. This rule would apply if the student quits before the course begins.
The UGC and AICTE have been told to take "punitive action including withdrawal of approval and recognition of erring institutions" on receipt of complaints from or on their own.
"Should a student leave after joining the course and if the seat consequently falling vacant gets filled by another candidate by the last date of admission, the institution must return the fee collected after a proportionate deduction of the monthly fee and hostel rent, where applicable," the HRD ministry directive said.
The directive is primarily aimed at ensuring the students covered by the other backward classes quota do not suffer due to the Supreme Court stay on OBC quotas. But others will benefit as well.
With this rule in place, students hoping to get into premier central institutes under the OBC quota have the option of taking admission into institutes. They can move out if they clear the examination once the quota imbroglio is settled.
The ministry order also noted that institutions and universities detained original certificates of students "to force retention of admitted students" and put a stop on this practice. "It would not be permissible for institutions and universities to retain the school/institution leaving certificates in original," the directive said.