New Delhi: In a landmark development for India’s power and infrastructure financing landscape, the Board of Directors of Power Finance Corporation Limited (PFC) has granted in-principle approval for a full-scale merger with its subsidiary, REC Limited. The move is aligned with the Union Budget 2026–27 consolidation roadmap aimed at creating larger, more efficient public sector non-banking financial companies (NBFCs).
The proposed merger is expected to create a stronger and more agile power-sector financier, with enhanced lending capacity to support India’s infrastructure expansion, renewable energy push, and long-term “Viksit Bharat” goals.
Revival of a Seven-Year-Old Consolidation Plan
The announcement revives a consolidation journey that began nearly seven years ago, when PFC acquired a 52.63% controlling stake in REC Limited from the Government of India for approximately ₹14,500 crore in March 2019.
At the time of the acquisition, a merger between the two power-sector lenders was anticipated by 2020. However, regulatory hurdles and structural considerations resulted in both entities continuing under a holding–subsidiary framework for several years. The latest decision marks a decisive shift toward full integration.
Acquisition Backed by Cabinet Approval
The acquisition follows the ‘in-principle’ approval of the Cabinet Committee on Economic Affairs (CCEA), marking a significant policy-driven restructuring move in the power finance sector. With this transaction, the Government has transferred its majority stake in REC to PFC, bringing both entities under a consolidated ownership framework.
Union Budget 2026–27 Vision Drives Consolidation
The move stems directly from the Union Budget 2026–27, which laid out a clear roadmap for public sector NBFC reforms. In her Budget speech, the Finance Minister emphasised the need to scale up credit disbursement and leverage technology to enhance operational efficiency.
“The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption. In order to achieve scale and improve efficiency in the Public Sector NBFCs, as a first step, it is proposed to restructure the Power Finance Corporation and Rural Electrification Corporation,” the Finance Minister said.
PFC Board Approves Acquisition and Notes Merger Plan
Following the Budget announcement, the Board of Directors of Power Finance Corporation, at its meeting held on February 6, 2026, formally approved the acquisition of the government’s stake in REC Limited.
The Board also took note of the Government’s intent to further streamline operations and granted in-principle approval for a future merger of PFC and REC, subject to statutory and regulatory approvals.
Post-Merger, PFC to Remain a Government Company
Clarifying the post-merger structure, the PFC Board stated that even after the proposed merger with REC, Power Finance Corporation will continue to remain a “Government Company” under the provisions of the Companies Act, 2013, and other applicable laws.
This assurance addresses concerns related to ownership structure, governance, and public sector character following consolidation.
Strategic Significance for Power Sector Financing
Both PFC and REC play a critical role in financing India’s power and infrastructure sectors. The consolidation is expected to –
- Improve operational efficiency
- Enhance lending capacity
- Reduce duplication of functions
- Strengthen balance sheets
- Enable better technology adoption
The move is also aligned with the Government’s Viksit Bharat vision, aimed at strengthening financial institutions that support long-term infrastructure development.
A Key Step in Public Sector NBFC Reforms
The acquisition marks the first major step in restructuring public sector NBFCs, as outlined in the Union Budget. By bringing PFC and REC under a single umbrella, the Government aims to create a stronger, more agile financial institution capable of meeting India’s growing power financing needs.
About Power Finance Corporation (PFC)
Power Finance Corporation Limited (PFC) is a leading financial institution in India specializing in funding and supporting the power sector. Headquartered in New Delhi, PFC plays a crucial role in financing power generation, transmission, and renewable energy projects across the country. It is a Schedule A public sector undertaking under the Ministry of Power.
About REC Limited
REC Limited is a Maharatna Central Public Sector Enterprise under the Ministry of Power, Government of India. The company plays a pivotal role in financing and promoting power sector infrastructure, including generation, transmission, distribution, and renewable energy projects, supporting India’s long-term energy security and sustainable development goals.
Read also: REC Limited Bags ‘Excellent’ MoU Rating for FY25, Continues Top Performance Streak for Third Year
