IRF Educational Trust of Naik runs the Islamic International School (IIS) at Mazgaon in Mumbai, which also has a branch in Chennai.
State Education Minister Vinod Tawde had earlier said that the ban on IRF would not affect the students in the institutions and necessary measures for their rehabilitation would be taken.
Sources in the state education department said that the first step would be banning the trustees of IRF and other key persons associated with it from involving in the school's day-to-day functioning and management.
The government will come up with a legal solution as the state cannot compromise with the future of the students, the sources added.
The Union Cabinet had recently approved a proposal to declare IRF as an 'unlawful association' under the Unlawful Activities Prevention Act for five years.
The government's move to ban IRF came after investigation by the Home Ministry which found that the NGO was allegedly having dubious links with Peace TV, an international channel, accused of propagating terrorism, an official said.