On Thursday, the power ministry established two panels to monitor the restructuring of the two financial organizations and examine the details of the proposed merger of state-run Power Finance Corp. and its subsidiary REC Ltd.
To investigate the terms of the merger, the ministry has formed a working group consisting of the director (distribution) and one executive director from each of the two businesses. In the other, the joint secretary (distribution) of the ministry serves as convenor and the chairpersons of PFC and REC serve as members of a high-level committee that would supervise the merger.
Through two distinct office orders that Mint examined, the ministry informed the relevant officials as well as the chairman and managing directors of the enterprises about the decision.
According to an office order, the working group will research and provide recommendations on personnel integration, including corporate and functional restructuring of the organization with restructuring of reporting structure, supervision of technology integration, and harmonization of pay, promotion issues, and inter-se seniority.
Among other pertinent concerns for the merger, it will also examine how to balance the interests of stakeholders, resolve conflicts between entities, and track the approval process of regulatory bodies. The group will give its proposals to the high-level merger committee at least once a week.
When asked questions via mail on Thursday night, the representatives of the power ministry, PFC, and REC did not immediately reply.
Large entity mergers necessitate collaboration on multiple levels, ranging from corporate operations to human resources. Following the announcement of their restructuring by Finance Minister Nirmala Sitharaman during the presentation of the Union budget on February 1, 2026, the board of directors of both companies has authorized the proposed merger.
Earlier this month, Sitharaman told Mint that working out the specifics of the proposed restructure will be necessary.
“We will have to wait and see what kind of justification it is. The departments will need to sit with us. They have conducted numerous in-depth investigations on the available options. Therefore, they specifically want us to sit down and have a conversation with the relevant ministry and finance. Therefore, we shall rationalize how we will, and the results and expectations of that rationalization will need to be observed after it is completed,” she had stated.
Given that these PSUs are essential to India’s energy transformation plans, the intention to consolidate the financial institutions becomes significance. By the end of FY25, their total loan book was about ₹11 trillion.
Plan for the budget
In 2019, the Center sold PFC its 52.63% ownership in REC for around ₹14,500 crore, converting REC into a PFC subsidiary. The electricity ministry proposed to designate PFC as a development finance organization in 2022, but the finance ministry turned it down.
Restructuring the two non-bank lenders focused on the electricity industry is the first step in increasing the efficiency of public sector non-banking financial companies (NBFCs), according to the finance minister, who presented the budget.
There are specific goals for both technology adoption and credit disbursement in the NBFCs’ “Viksit Bharat” vision. The proposal is to restructure the Power Finance Corporation and Rural Electrification Corporation as a first step to increase size and efficiency in public sector NBFCs,” she had stated.
Under the auspices of the power ministry, the “Maharatna” public sector NBFCs offer long-term loans and funding to satisfy the demands of India’s power industry. Both have expanded their financing in recent years to include a wider range of infrastructure industries, such as ports, airplanes, and roads and highways.
The two businesses are important funders of India’s green transition plan. 15% of PFC’s total loan book of ₹5.4 trillion, or ₹81,031 crore, were renewable loans as of FY25. PFC has thus far backed the installation of 60 GW of renewable energy capacity. Its gross non-performing assets for FY25 were 1.94% of the loanbook, per its annual report.
At the conclusion of the previous fiscal year, REC’s loan book was close to ₹5.7 trillion. By March 2025, it has facilitated the installation of 52 GW of renewable energy capacity, with ₹57,994 crore in the segment loan book.
At the moment, REC’s market capitalization is 93,123.97 crore, whereas PFC’s is over 1.355 trillion.
