Singh, who is in Malaysia on a state visit, made the announcement while addressing the Indian community here.
The fund was set up in 1946 by former prime minister Jawaharlal Nehru to assist Malaysian-Indian students. With the new grant, the corpus of the fund will be 7.55 crore rupees.
Malaysian-Indians had requested Indian government to allot some quota for their students.
Singh also announced 20 scholarships for Malaysian students to study traditional system of medicine in India.
Muslim-majority Malaysia's 27 million people are 25 per cent ethnic Chinese and eight per cent ethnic Indians, who are mostly Hindus from Tamil Nadu.
Earlier, a Malaysian party had requested Singh to let more Malaysian-Indian students in India to study alleging that capable students were unable to get admission in universities here.
The Human Rights Party, which evolved after the Hindu Rights Action Force (HINDRAF) was outlawed in 2007, alleged that though Malaysia had one of the largest Indian populations outside India, they felt marginalised in their own country.
The pro-India Human Rights Party was launched by P Uthayakumar, an ethnic Indian who was one of the Hindraf leaders