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 task force with one executive from both the companies and a director (distribution) in the ministry to study the modalities of the merger. The second is a high-level committee to oversee the merger, comprising the chairmen of PFC and REC and the ministry’s joint secretary (distribution) as convener. The ministry conveyed the decision to the concerned officials and the chairman and managing directors of the companies through two separate office orders, reviewed by Mint.
The office order stated that the task force will study and make proposals regarding personnel integration, including harmonization of salaries, promotion and seniority matters, corporate and functional restructuring of the organization with restructuring of the reporting structure and oversight of technology integration.
It will also address the harmonization of stakeholder interests, resolution of inter-entity issues, monitoring of regulatory approval progress and other matters relevant to the merger. The group will meet at least once a week and submit its recommendations to the high-level committee for the merger.
Spokesmen for the Department of Energy, PFC and REC did not immediately respond to questions sent Thursday evening.
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The merger of large entities requires synergy at several levels – from human resources to business operations. The boards of the two firms approved the proposed merger after Finance Minister Nirmala Sitharaman announced their restructuring while presenting the Union Budget on 1 February 2026.
In an interview with Mint earlier this month, Sitharaman said the modalities of the proposed restructuring would need to be worked out.
“What the rationalization will be remains to be seen. We will have to sit down with the ministries. They have done quite a lot of intensive studies on what can be done. So what exactly they want us to do is something that finance and the relevant ministry will have to sit down and talk about. So we will rationalize how we will do it and what will be the result, what will be the expectations of that rationalization when it is done,” she revealed.
The plan to merge financial institutions assumes significance as these PSUs play a key role in India’s energy transformation plans. Their cumulative loan book was u ₹11 trillion at the end of FY25.
Budget plan
REC became a subsidiary of PFC in 2019 when the center sold its 52.63% stake in REC to PFC for approx. ₹14,500 million crowns. In 2022, the Ministry of Finance rejected the proposal of the Ministry of Energy to give PFC the status of a development financial institution.
Presenting the budget, the finance minister said the restructuring of two non-banking lenders focused on the power sector is the first step to improve the efficiency of public sector non-banking financial companies (NBFCs).
“NBFC’s vision for ‘Viksit Bharat’ has been outlined with clear objectives for disbursement of loans and adoption of technology. In order to achieve scale and improve efficiency of public sector NBFCs, the first step is proposed to restructure Power Finance Corporation and Rural Electrification Corporation,” she said.
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Public sector ‘Maharatna’ NBFCs under the auspices of the Ministry of Power provide long-term financing and loans to meet the requirements of India’s power sector. In the past few years, both companies have diversified their lending across infrastructure sectors, including roads and highways, aviation and ports.
The two companies are among the key financiers for India’s green transition plan. In 25, PFC’s revolving credit portfolio was at par ₹81,031 crore, 15% of its total loan portfolio ₹5.4 trillion. PFC has so far supported the installation of 60 GW of renewable energy capacity. According to its FY25 annual report, its gross non-performing assets stood at 1.94% of the loan portfolio.
REC’s loan book was almost at par ₹5.7 trillion at the end of the last fiscal. It supported the installation of 52 GW of renewable energy capacity from March 2025 and the segment loan book was at ₹57,994 million crowns.
The market capitalization of PFC currently hovers around ₹1.35 trillion while REC is ₹93,123.97 million crowns.
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