It is quite understandable that at the UG and PG levels, the number of people applying for seats is humongous , so much so, that the funds generated through application fees itself runs into hundreds of crores. At such a juncture , it is logically to have a gauntlet which will act as a filter to separate the husk from the grain; and in most cases it is effective.
But when the number of people are a few hundred, for a programme that although sought after is not a necessary qualification for the majority of the crowd, when the people who apply to it must have done so after serious consideration about their own capabilities and future prospects, it seems illogical, or rather, irrelevant to put them through another competitive examination.
It seems to send a wrong signal to the world - "Even after 21 years of education, you still need to prove yourself, rather than be given a chance for having proved yourself till now." How about having a face to face discussion with them all, all 300 odd of them?? its a daunting task, but its well worth the time since you will understand your candidates , the people who chose your institution all the more better, helping you fine tune your requirements to the people you want to have in your institute in the first place.
But I guess we live in a square world, where a well rounded idea has to be shaped into an existing box. Its a Rat race even at the end of knowledge.