With a combined loan book of over Rs 11 lakh crore and deep exposure to India’s power and infrastructure build-out, the government has formally set the merger of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) into execution mode, constituting a high-level committee and a dedicated working group to drive the integration of the two state-run lenders.
Office orders issued by the power ministry on February 19 establish a three-member high-level committee — comprising the CMDs of PFC and REC, along with the Joint Secretary (Distribution) — to monitor the merger on a weekly basis. A separate working group has been tasked with resolving operational, personnel and structural issues involved in combining the two Maharatna NBFCs.
Monitoring the Maharatna Merger
Together, PFC and REC manage loan books of roughly Rs 6 lakh crore each, making the merged entity one of India’s largest infrastructure financiers, with a strong focus on power generation, transmission, renewables and, increasingly, non-power infrastructure such as roads, ports and emerging digital assets.
“The committee shall receive regular progress reports from the working group. It may meet once every week to take stock of various issues so as to ensure smooth merger of the two entities,” the ministry order reviewed by FE said.
The working group will study personnel integration — including harmonisation of pay, promotions and inter-se seniority — along with corporate restructuring, reporting frameworks, technology integration and regulatory approvals.
The move follows in-principle board approvals earlier this month by both companies, after Finance Minister Nirmala Sitharaman announced the restructuring in the FY27 Budget as part of a broader push to scale up and improve efficiency in public sector NBFCs.
Power sector lending remains the backbone of both institutions, with around 40% of their loan books tied to distribution companies. Renewable energy has emerged as a major growth engine, accounting for 12–15% of their portfolios — positioning the merged entity as a central financier of India’s clean energy transition.
As of FY25, PFC’s renewable loan book stood at over Rs 81,000 crore, supporting nearly 60 GW of capacity, while REC had financed more than 52 GW of renewables with exposure close to Rs 58,000 crore. Both firms have also expanded into highways, aviation infrastructure and ports to diversify earnings.
Industry executives say the merger is aimed at creating a financing powerhouse capable of underwriting large, complex projects, including ultra-mega renewable parks, national transmission corridors and energy-intensive digital infrastructure such as AI-enabled data centres.
Financing the Transition
“The logic is scale, capital efficiency and sharper execution,” said a senior official familiar with the restructuring. “Large energy transition projects increasingly require balance sheets that can absorb long-tenor risk and mobilise massive capital quickly.”
REC became a subsidiary of PFC in 2019 after the Centre sold its 52.63% stake for about Rs 14,500 crore, formally bringing both institutions under one umbrella — a move that laid the groundwork for today’s full consolidation.
The merger is also expected to streamline overlapping portfolios, improve cost efficiencies and strengthen access to global capital markets as India’s infrastructure funding requirements accelerate sharply over the next decade.