Aniket PujariPower Finance Corp. Ltd’s board on Friday approved the merger of its subsidiary REC Ltd into the parent, days after the Union Budget 2026-27 proposed restructuring of the two power-sector-focused non-banking financial companies (NBFCs).
The PFC board said in a regulatory filing that it would “ensure that, post-merger, PFC continues to remain as a ‘Government Company’ under the Companies Act, 2013 and other applicable laws”, adding that the detailed merger scheme, once finalized, would be shared after requisite approvals.
These public-sector undertakings (PSUs) play a key role in the country’s energy transition plans and have a cumulative loan book of ₹11 trillion.
On Thursday, in an interview, Union finance minister Nirmala Sitharaman said both the ministries of finance and power will discuss and outline the modalities of the proposed transaction. “What kind of a rationalization it will be, will have to be seen,” Sitharaman said.
While presenting the Budget 2026, Sitharaman had said the restructuring of both the power-sector-focused NBFCs is the initial step towards improving the efficiency of public-sector 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 PFC and REC,” she said in Parliament on 1 February.
REC became PFC’s subsidiary 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 accord development finance institution (DFI) status to PFC Ltd.
Renwable energy financing
The ‘Maharatna’ public-sector NBFCs, under the power ministry’s control, provide long-term financing and loans to meet the requirements of the country’s power sector. In the past few years, both companies have diversified their lending operations across several infrastructure sectors, including roads and highways, aviation and port infrastructure.
As of 2024-25, PFC’s renewable loan portfolio stood at ₹81,031 crore, or 15% of its overall loan book of ₹5.4 trillion. So far, PFC has supported the installation of 60 gigawatts of renewable energy capacity. According to its annual report for 2024-25, PFC’s gross non-performing assets were at 1.94% of the loan book.
REC’s renewable energy portfolio stood at ₹57,994 crore, or nearly 1% of its nearly ₹5.7 trillion loan book, at the end of the last fiscal. As of March 2025, it supported the installation of 52GW of renewable energy capacity.
The restructuring, along with streamlining operations, would improve the credit flow, according to experts.
“The restructuring of PFC and REC has the potential to materially shape long-term financing capacity, risk appetite, and project execution velocity across the sector,” said Sambit Patra, partner at consulting major Bain & Co. in India.
Shares of PFC on BSE closed at ₹419.20, down 1.01% from its previous close on Friday, while those of REC Ltd fell 2.51% to ₹372.50 per share. At the end of the trading hours on Friday, the market capitalization of PFC stood at ₹1.38 trillion, while that of REC was ₹98,087 crore.
