Power Finance Corporation Limited (NSEI:PFC) and REC Limited (NSEI:RECLTD) on 06 February 2026 gave in-principle approval for a proposed merger of the two companies. In separate notices to stock exchanges, the two state-run non-banking financial companies said a detailed merger proposal will be made ensuring that the merged entity continues to remain a 'government company' under the Companies Act, 2013. In 2019, PFC acquired a 52.63% stake in REC, making it a PFC subsidiary."Board of REC has accorded its in-principle approval to proceed with restructuring in the form of a merger of REC and PFC and to formulate a detailed merger proposal in accordance with applicable laws and regulations," an REC statement said.
The board approval for merger follows an announcement by finance minister Nirmala Sitharaman in the budget about restructuring of PFC and REC."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 REC," Sitharaman had said. The detailed merger scheme will be placed for consideration after obtaining the necessary statutory, regulatory and other approvals.PFC and REC are key financiers of India's power sector, providing long-term funding for generation, transmission and distribution projects.PFC's standalone loan asset book stood at ? 5.6 lakh crore while REC had a loan book of ?
5.8 lakh crore as on September end.Both have their portfolio majorly in power generation, distribution and transmission, but also have exposure in the infrastructure and logistics sector as part of their aim to diversify. A merger could potentially create a larger, more efficient lending institution with greater scale and financial flexibility, although the details of the structure and operational aspects of the integration remain to be spelled out.Anujesh Dwivedi, partner at Deloitte India, had told ET that the step could be to ready the companies for larger scale of investments that will be required in the electricity sector in the coming years to meet the dual goals of supporting GDP growth and energy transition.
