PFC board approves bringing REC into its fold

Power Finance Corp. Ltd’s board of directors on Friday approved the merger of its subsidiary REC Ltd with the parent company, days after the Union Budget 2026-27 proposed restructuring of two non-banking finance companies (NBFCs) focused on the power sector.

PFC’s board of directors said in a regulatory filing that it would “ensure that, post-merger, PFC continues to remain a ‘Government Company’ in accordance with the Companies Act, 2013 and other applicable laws,” adding that the detailed merger plan once finalized will be shared after necessary approvals.

These public sector undertakings (PSUs) play an important role in the country’s energy transition plans and ₹11 trillion.

In an interview on Thursday, Union finance minister Nirmala Sitharaman said both the finance and power ministries will discuss and outline the modalities of the proposed transaction. “It will remain to be seen what kind of rationalization this will be,” Sitharaman said.

While presenting Budget 2026, Sitharaman had said that restructuring of both power sector focused NBFCs is the first step towards improving the efficiency of public sector NBFCs.

“The vision of NBFCs for ‘Viksit Bharat’ has been outlined with clear targets for loan disbursement and technology adoption. To achieve scale and improve efficiency in public sector NBFCs, restructuring of PFC and REC has been proposed as a first step,” he said in Parliament on February 1. he said.

REC became a subsidiary of PFC in 2019 when the Center sold approximately 52.63% stake in REC to PFC. ₹14,500 crore. In 2022, the finance ministry rejected the energy ministry’s proposal to grant development finance institution (DFI) status to PFC Ltd.

Renewable energy financing

‘Maharatna’ public sector NBFCs, under the control of the power ministry, provide long-term finance and loans to meet the requirements of the country’s power sector. Over the past few years, both companies have diversified their lending operations into several infrastructure sectors, including roads and highways, aviation and port infrastructure.

As of 2024-25, PFC’s renewable loan portfolio was: ₹81,031 crore or 15% of total loan book ₹5.4 trillion. PFC has so far supported the installation of 60 gigawatts of renewable energy capacity. According to the 2024-25 annual report, PFC’s gross non-performing assets stood at 1.94% of the loan book.

REC’s renewable energy portfolio ₹57,994 crore or almost 1% ₹5.7 trillion loan book at the end of the last fiscal year. As of March 2025, it supported the installation of 52GW renewable energy capacity.

According to experts, restructuring will improve credit flow along with accelerating operations.

India’s leading Bain & Co. “The restructuring of PFC and REC has the potential to significantly shape long-term financing capacity, risk appetite and pace of project execution across the sector,” said Sambit Patra, consulting partner.

Shares of PFC on BSE closed at: ₹419.20, down 1.01% from its previous close on Friday, while REC Ltd’s was down 2.51%. ₹372.50 per share. At the end of trading hours on Friday, PFC’s market capitalization was as follows: ₹1.38 trillion, while REC’s ₹98,087 crore.