New Delhi, February 7, 2026
The Boards of Directors of REC Limited and Power Finance Corporation Limited have granted in-principle approval to proceed with a proposed merger, marking a significant step toward consolidation in India’s public sector power finance space.
The move follows the announcement made in the Union Budget 2026–27, which outlined the government’s strategy to enhance scale, efficiency, and technological capability among public sector non-banking financial companies (NBFCs) operating in the power sector.
Merger Aligned With Government’s Reform Vision
During her Budget speech, the Finance Minister emphasized the government’s vision under Viksit Bharat, setting clear objectives for increased credit disbursement, improved operational efficiency, and accelerated adoption of technology across public sector NBFCs. As part of this reform roadmap, restructuring of Power Finance Corporation and Rural Electrification Corporation was proposed as an initial step.
On February 6, 2026, the Boards of both REC and PFC formally noted that the proposed restructuring would involve the preparation of a detailed merger scheme in compliance with applicable laws, regulatory frameworks, and statutory requirements.
Government Company Status to Continue
In regulatory filings, both companies clarified that the merged entity will continue to be classified as a “Government Company” under the provisions of the Companies Act, 2013. This assurance is aimed at maintaining policy continuity, governance standards, and sovereign backing for the combined institution.
The finalized merger scheme will be submitted to the relevant authorities for necessary approvals once the detailed structure is completed.
Integration Details Awaited
Officials indicated that further information regarding the merger structure, integration roadmap, and implementation timelines will be disclosed after the completion of the approval process.
Power Finance Corporation currently holds a 52.63% majority stake in REC, following its acquisition of the Government of India’s shareholding in REC in 2019. The proposed merger is expected to create a larger, more efficient power sector financing entity with enhanced lending capacity and operational synergies.
