State-owned power sector lender Power Finance Corporation (PFC) has approved an in-principle merger with its subsidiary REC Ltd, marking a key step in the government’s plan to restructure public-sector non-banking financial companies (NBFCs) to improve scale, efficiency and credit delivery.

Board Approval and Merger Framework

PFC said its board has taken note of the Union Budget announcement on restructuring public NBFCs and has cleared the proposed merger at a preliminary stage. The merged entity will continue to operate as a government company under the Companies Act and other applicable regulations.

PFC became the majority owner of REC in March 2019 after acquiring a 52.63% stake from the government for ₹14,500 crore following Cabinet approval. Since then, the two institutions have operated in a holding–subsidiary structure.

In a stock exchange filing issued after the board meeting, PFC said a detailed merger scheme will be shared once all necessary regulatory and statutory approvals are secured.

Budget-Driven Push for Scale and Efficiency

In her Union Budget speech on February 1, the Finance Minister outlined a broader strategy to strengthen NBFCs in support of the Viksit Bharat vision, with a focus on expanding credit availability, improving operational efficiency and leveraging technology.

As part of this roadmap, the consolidation of PFC and REC has been identified as an initial step toward building scale and creating a more robust public-sector financing institution.

The proposed merger aims to create a larger, more efficient lending platform dedicated to supporting India’s power and infrastructure sectors.

Summary

The PFC board has approved an in-principle merger with REC Ltd, aligning with the government’s plan to strengthen public-sector NBFCs. The consolidation is expected to enhance scale, efficiency and credit delivery, creating a stronger financing platform for the power and infrastructure ecosystem while retaining government ownership.

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