UGC allocates and disburses grants to universities and higher education institutions to ensure their smooth operation and to help them realize academic excellence. UGC is also expected to define the academic standard of higher education and to facilitate good rapport and coordination among the universities in the country, thereby encouraging them to cooperate, collaborate, and exchange their academic experiences. In line with this spirit and expectation, the UGC Act (1993) mandates the University Grants Commission to carry out the following functions:

● Formulate policies for allocating government grants to universities and higher education institutions;

● Disburse grants to universities and colleges, and make recommendations to the government for revising the provision of grants;

● Award grants for research, scholarships, and fellowships;

● Take necessary measures to maintain the standards of higher education;

● Advise the government on matters concerning the establishment of new universities, or the operation of an institution of higher education with an affiliation to foreign universities/ institutions;

● Make necessary arrangements for the exchange of resources, funds, and fellowships between universities and educational institutions within and outside Nepal.