Govt Sets Up Panels To Work Out PFC-REC Merger Process

(MENAFN- Live Mint) New Delhi: The power ministry on Thursday set up two panels to study the modalities of the proposed merger of state-run Power Finance Corp and its subsidiary REC Ltd, and oversee the restructuring process of the two financial institutions.

The ministry has set up a working group with one executive director each from the two companies and the director (distribution) in the ministry to study the modalities of the merger. The other is a high-level committee to oversee the merger, with the chairpersons of PFC and REC as members, and the ministry's joint secretary (distribution) as convenor. The ministry conveyed the decision to the concerned officials and the chairman and managing directors of the companies through two separate office orders that were reviewed by Mint.

An office order said the working group will study and make proposals on personnel integration, including harmonization of pay, promotion matters and inter-se seniority, corporate and functional restructuring of organization with restructuring of reporting structure and supervision of technology integration.

It will also look into harmonizing stakeholder interests, resolving inter-entity issues, monitoring progress on approval of regulatory authorities among other relevant matters for the merger. The group will meet at least once a week and present its recommendations to the high-level committee on the merger.

The spokespesons at the power ministry, PFC and REC did not immediately respond to queries mailed on Thursday evening.

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Merger of large entities require synergy at several levels-from human resources to business operations. The board of directors of both firms have approved the proposed merger after finance minister Nirmala Sitharaman announced their restructuring while presenting the Union budget on 1 February 2026.

In an interview to Mint earlier this month, Sitharaman had said the modalities of the proposed restructuring will need to be worked out.

"What kind of a rationalization it will be, will have to be seen. We'll have to sit with the departments. They've had quite a few intensive studies on what can be done. So what exactly they want us to do is something which finance and the concerned ministry will have to sit and talk. So we will rationalize how we will and what will be the outcome, what will be the expectations of that rationalization will have to be seen after it is done," she had said.

The plan to merge the financial institutions assumes significance given that these PSUs have a key role in India's energy transition plans. Their cumulative loan book was at ₹11 trillion at the end of FY25.

Budget plan

REC became a subsidiary of PFC in 2019, when the Centre sold its 52.63% stake in REC to PFC for about ₹14,500 crore. In 2022, the finance ministry rejected the power ministry's proposal to give PFC the status of a development finance institution.

Presenting the budget, the finance minister had said that the restructuring of the two power sector-focused non-bank lenders is the initial step towards improving the efficiency of public sector non-banking financial companies (NBFCs).

"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," she had said.

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The 'Maharatna' public sector NBFCs, under the aegis of the power ministry, provide long-term financing and loans to meet the requirements of India's power sector. In the past few years, both have diversified their lending across infrastructure sectors, including roads and highways, aviation and ports.

The two companies are among key financiers for India's green transition roadmap. As of FY25, PFC's renewable loan portfolio was at ₹81,031 crore, 15% of its overall loan book of ₹5.4 trillion. So far, PFC has supported installing 60 GW renewable energy capacity. According to its annual report for FY25, its gross non-performing assets were at 1.94% of the loanbook.

REC's loan book was at nearly ₹5.7 trillion at the end of the last fiscal. As of March 2025, it supported installation of 52 GW renewable energy capacity and the segment loan book was at ₹57,994 crore.

PFC's market capitalization is currently at around ₹1.35 trillion, while that of REC is ₹93,123.97 crore.

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