Tessa Blackstone, vice-chancellor of the University of Greenwich, said her institution had experienced a 20 per cent drop in international students in 2011-12 owing to its dependence on recruitment from the subcontinent.

Earlier in the summer, Middlesex University - where about 40 per cent of non-European Union students come from India - said that it was expecting a 50 per cent year-on-year decline in students from the country, costing it millions of pounds in lost fees.

Baroness Blackstone revealed Greenwich's drop in demand in a question to Vince Cable, the Liberal Democrat business secretary, following his speech to the Universities UK conference last week at Royal Holloway, University of London.

She said a number of institutions were encountering a "deep decline" in applications from India because of the reforms brought in by the ³ÉÈËVRÊÓƵ Office in March, one of which will close the existing route used by students to stay on and work in the UK post-graduation.

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Mr Cable blamed much of the drop in demand on what he described as "garish stories" about the reforms being published in the Indian press.

He claimed the reports were misleading students in the country by giving the false impression that the UK was closed for business.

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"When I was in India with the Prime Minister we were endlessly bombarded with questions that were basically completely false," he said in reply to Baroness Blackstone's question.

However, he also pledged to work with David Willetts, the universities and science minister, to continue to impress on the ³ÉÈËVRÊÓƵ Office the importance of overseas students to UK universities.

"We understand the problem and are fighting to get the best outcome," he said, although he joked that "I've probably said too much for my own good on immigration policy".

Eric Thomas, the new UUK president, suggested that the downturn in recruitment may be due to the fact that "public discourse and debate (in the UK) is about decreasing migration".

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This may have sent a signal overseas that students were no longer welcome, he added.

However, the University of Bristol vice-chancellor also cautioned that Greenwich's figures were not "proof perfect" of a problem being experienced across the sector and pointed to an increase in applications at his institution.

"International students tend to be a movable feast," he added.

Meanwhile, universities with smaller numbers of international students have expressed fears that rules brought in by the UK Border Agency last week could jeopardise their right to recruit students from overseas.

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The guidelines, which will affect any university that has yet to apply to renew its Highly Trusted Sponsor status this year, set minimum thresholds for institutions on the number of international students that successfully take up offers of places.

Smaller universities argue that the percentage thresholds mean they could be penalised and lose their Highly Trusted Sponsor status - now a requirement in order to recruit from overseas - if just a handful of students fail to enrol for legitimate reasons.

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simon.baker@tsleducation.com.