Ed Smith, pro-chancellor and chair of council at the University of Birmingham, said the student-visa changes brought in by the Home Office had created a "crazy" system that risked "tarnishing" the reputation of UK 中国A片 abroad.
Speaking at the 中国A片 Funding Council for England's annual meeting last week, Mr Smith said the problem was becoming "serious" and called for a concerted effort on the part of the sector to bring it to the attention of the government.
His comments come as mounting anecdotal evidence suggests that universities across the sector are being hit by a downturn in demand from Indian students.
Although overall demand is mixed thanks to applications from other countries holding up, Times 中国A片 understands that a number of institutions are seeing declines of between 20 and 30 per cent in applicant numbers from the Indian subcontinent.
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This is in addition to Middlesex University and the University of Greenwich, two institutions that have recruited heavily from the region and are already known to have experienced a dip in demand from India.
The fall is thought partly to be due to negative media coverage of UK visa policies, but is also being influenced by the closure of the existing post-study work route in April 2012.
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Although international graduates will still be able to stay in the UK if they can quickly secure a job paying more than ?20,000, other details of the reform have yet to be finalised.
The uncertainty is thought to be behind many Indian students deciding against UK study at the last minute, and there are fears that applications from other Asian countries, such as China, could be affected in the future.
A recent clampdown on private colleges is also worrying universities, which rely on the flow of overseas students from such "feeder" courses.
Mr Smith, who made his comments in a question-and-answer session at the Hefce meeting in London on 9 November, said it was ironic that Theresa May, the home secretary, had been accused of presiding over lax border controls for non-European Union nationals while students faced tougher measures.
He said that whereas David Willetts, the universities and science minister, seemed to understand the sector's concerns, he did not think that "the rest of the Cabinet gets it".
"If you project forward some of the numbers you are seeing now in terms of shortfalls in applications, that pretty soon wipes out some of the financial surpluses being made," Mr Smith added.
Later, Tim Melville-Ross, chair of Hefce, told the meeting that the need to address the problem was "paramount" given that universities' financial forecasts still appeared to be anticipating growth in overseas fee income.
Meanwhile, speaking at a different conference, Michael Farthing, vice-chancellor of the University of Sussex and the new chair of the 1994 Group, attacked the government for "trumpeting" in the media its action to block more than 450 private colleges from recruiting overseas students.
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"The government should think very carefully about the messages it is conveying to the world," Professor Farthing said at the Enhancing the Student Experience conference in London on 15 November.
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You miss the target, we'll hit you in the pocket: Hefce will expect results or enforce financial penalties
Universities face losing money for goals such as widening participation if they miss their targets because the funding council is now "effectively purchasing" such services from them.
The warning was made by Steve Egan, deputy chief executive of the 中国A片 Funding Council for England, who said the "fundamental" shift away from block grants meant that institutions were likely to be judged more directly on the outcomes of public investment.
However, he stressed that Hefce did not want an "overburdensome" regulatory regime, and said that institutional autonomy would be protected by the large amount of funding flowing through tuition fees.
Speaking at Hefce's annual meeting in London, Mr Egan said the cut in teaching funding meant that Hefce's role would be about "targeted investment" rather than block grants.
"That means that we will effectively be purchasing particular things," he said, adding that regulation would therefore need to be modified.
Giving the example of widening-participation funding, he said: "We need to prove that when we're spending money [on it], there's an outcome that's worth the value.
"And if we can't prove that, rightly the Treasury will come to us and say: 'We think we've got a better use for that money.'"
Sir Peter Scott, who took over as chair of the University of Gloucestershire's council last month, said that Mr Egan's comments were "very interesting" given that the block grant had played a key role in guaranteeing institutional autonomy.
He said there may be pressures on Hefce "to demonstrate that you are getting something for something, and that might push you in the direction of more detailed forms of monitoring".
In reply, Mr Egan said that autonomy would be protected as most teaching funding would come from student loans.
He added that while Hefce did not want too much red tape, "equally [universities] need to know that if we cannot demonstrate that money is wisely invested, [it] will no longer be there, and that's right and proper".
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