PFC-REC Merger Moves Closer as Centre Considers 

October 26, 2026October 26, 2026

The proposed merger of Power Finance Corporation (PFC) and REC Limited has moved a step closer, with the Finance Ministry reviewing the proposal before it is sent to the Union Cabinet for approval. 

The government is considering issuing preference shares to maintain at least a 51% stake in the merged entity and preserve its government-owned status. The merger is targeted to take effect from April 1, 2027. 

The Centre currently holds a 55.99% stake in PFC, while PFC owns 52.63% of REC. After the merger, the government’s direct stake in the combined company could fall below 51%.

Issuing preference shares to the government is being considered as a way to maintain the required share capital at a potentially lower cost than issuing fresh equity or using recapitalisation bonds. The final structure and amount of preference capital have not yet been confirmed.

The boards of both companies approved the merger scheme in June 2026. The Reserve Bank of India issued a no-objection certificate on October 15, followed by observation letters from the National Stock Exchange and BSE on October 19.

Under the proposed arrangement, eligible REC shareholders will receive 88 PFC shares for every 100 REC shares they hold. The merger still requires the remaining statutory, regulatory, shareholder and creditor approvals.

The combined lender is expected to have a loan book exceeding Rs 11 lakh crore, giving it greater capacity to finance electricity generation, transmission, distribution and renewable energy projects.

The merger could improve operational scale and support large infrastructure investments. Investors will watch for Cabinet approval, the final ownership structure and further details on the implementation timeline.

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