Ministry Initiatives and Oversight Mechanisms
As of April 2026, the Ministry of Power has initiated the merger process between Power Finance Corporation (PFC) and REC Limited. To coordinate the integration, the Ministry has established a high-level steering committee and a working group. These bodies are responsible for oversight and the finalization of the consolidation according to the directives set by the government.
Historical and Strategic Context
The consolidation was prompted by the Union Budget 2026 announcement. The two entities already maintain a parent-subsidiary structure following an acquisition in 2019; as of December 31, 2025, PFC holds a 53% stake in REC. The stated objectives of the merger include achieving increased scale, operational efficiency, and a strengthened flow of credit for power infrastructure projects.
Operational and Oversight Framework
The steering panels have a specific mandate to oversee and finalize the modalities of the integration. The working group is tasked with coordinating with external agencies, including valuation experts and restructuring specialists. Following the merger, the combined entity will remain a “Government Company” under the Companies Act, 2013. This legal status ensures the continuity of Government of India (GoI) ownership, control, and strategic alignment with national priorities.
Scale and Financial Profile of the Combined Entity
The financial profile of the consolidated group is defined by the following metrics as of December 31, 2025:
- Consolidated Loan Book: ₹11.5 lakh crore.
- Loan Book Distribution: 39% in Distribution, 32% in Conventional Generation, 16% in Renewables, 7% in Transmission, and 7% in other sectors.
- Market Share: A target combined market share of 40% in the power sector infrastructure financing segment.
- Consolidated Gearing: 5.7x, representing moderate capitalization.
- Profitability: A consolidated net profit of ₹25,028 crore for the nine-month period ending December 31, 2025 (9M FY2026).
- Return on Managed Assets (RoMA): 2.7% for 9M FY2026.
Credit Rating Profile and Regulatory Compliance
Both PFC and REC currently operate within the exposure and concentration limits prescribed by the Reserve Bank of India (RBI). The group maintains a credit rating of [ICRA]AAA (Stable) for long-term borrowing and [ICRA]A1+ for short-term borrowing. According to ICRA, these ratings are supported by the strategic importance of the group to the government and its sovereign ownership, with the GoI holding a 56% stake in PFC.
The merger is occurring amid an improving trend in asset quality. Consolidated gross stage 3 assets declined to 1.26% of total advances as of December 31, 2025, compared to 1.6% as of March 31, 2025. The entities continue to serve as nodal agencies for the implementation of several government schemes, including the Revamped Distribution Sector Scheme (RDSS), PM Suryodaya Scheme, Saubhagya, and Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY). While the merger is expected to support portfolio diversity, incremental fund-raising relative to lender exposure limits remains a point for regulatory monitoring.
Finalization Status
The specific modalities of the integration and the individual members of the steering panels have not been disclosed. The process remains under the oversight of the Ministry of Power and the respective boards of PFC and REC.
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