Abuse of the Indian student market has destroyed trust in private tertiary institutions, with the sector reeling from a government crack-down, a tertiary education group says.

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Tertiary institution staff are suspected of fraud and corruption and their employers may be turning a blind eye to some offending, according to an Immigration New Zealand 'intelligence report'.

Independent Tertiary Education NZ represents most private institutions, which have experienced a boom in enrolments by Indian students in the past three years.

Chairperson Christine Clark, said ongoing problems with the recruitment and treatment of Indian students had given the private sector "a bad rap".

"NZQA has hit us incredibly hard, far harder than in all honesty a handful of rogues should have warranted," she said.

"The government kept talking about high trust, high accountability. Well, it's just high accountability now and no trust, all because of this Indian market. The ramifications have been absolutely huge."

The Immigration NZ report, obtained under the Official Information Act, showed the extent of official concerns about the sector.

The document, dated May this year, said New Zealand education provider staff "are almost certainly" involved in "poor conduct and poor business practices".

The concerns included polytechnics, with Immigration documents last year saying polytechnic chief executives were not fully aware of how their institutions were being marketed in India and what sort of student they were attracting.

Immigration NZ spokesperson Steve McGill said the situation had improved significantly.

"If they are not there yet, most are heading in the right direction," he said.

"There are a few that we continue to work with, and jointly with NZQA we will make sure that people are able to deliver on what's expected of them."

Ms Clark said institutions would definitely be cracking down on any abuse of Indian students by their staff.

"They're definitely taking action. I mean they'd have to be fools not to wouldn't they - you've got two huge agencies looking at you now, you'd have to take action against your staff," Ms Clark said.

'Mass under-resourcing' of fraud investigations

Meanwhile, an immigration lawyer told RNZ Immigration NZ did not have enough resources to crack down on abuse of Indian students.

Immigration documents showed it had been investigating job-selling to foreign students seeking work visas and residence.

Alastair McClymont said Immigration needed more staff to investigate abuse by employers as well as allegations of fraud and bribery at tertiary institutions.

"I have heard through Immigration NZ that there's mass under-resourcing of the fraud investigation department," he said.

"They just don't seem to be putting any resources into it. I just don't think the government really cares about it because it's not that much of an issue for them."

Mr McClymont said some of his clients had tried to lodge complaints with Immigration but been turned away.

Peter Devoy from Immigration NZ said most complaints from students were anonymous, which made them difficult to follow up.

"INZ takes all complaints seriously and is not aware of any complaints that were refused to be considered," he said.

Mr Devoy said in the 2016-17 financial year, Immigration NZ received more than 1300 complaints relating to fraud and its investigations and compliance team had 85 full-time equivalent nationwide, 20 of whom were investigators.

"The level of offending INZ is detecting and prosecuting has become more serious and complex, which is reflected in the number and seriousness of successful prosecutions. Between July 2014 and July 2017 there have been 77 prosecutions taken by INZ, including 23 cases involving fraud in the employment space."

Migrant Workers Association spokesperson Anu Kaloti said fraud in the international student market had been going on for a number of years and was getting worse.

"I'm definitely aware of it for the last four to five years but it has gotten worse in recent years, especially when we see the new immigration policies about to be implemented with another new category of people in there and the wage threshold has been lowered," she said.