Overview
President Droupadi Murmu approved the merger of REC Ltd with Power Finance Corporation (PFC) on 10 June 2026. The combined entity will be a giant lender for India's power and infrastructure sectors. REC will be dissolved after transferring all assets and liabilities to PFC. The merger follows a 2019 acquisition and Budget 2026 announcement.
A Historic Merger
On 10 June 2026, India took a major step in consolidating its public sector financial institutions. President Droupadi Murmu approved the merger of REC Ltd (formerly Rural Electrification Corporation) with Power Finance Corporation (PFC) . This decision comes nearly seven years after PFC acquired the government’s majority stake in REC. The merger will create one of India’s largest power sector-focused financing institutions. It aims to improve efficiency, reduce duplication, and strengthen support for the country’s energy transition and infrastructure development.
How the Merger Proposal Evolved
The roots of this merger go back to March 2019 . In that month, PFC acquired the Government of India’s 52.63% stake in REC for ?14,500 crore . This made REC a subsidiary of PFC. Since then, both companies have worked closely as major financiers of India’s power sector. In the Union Budget 2026 , Finance Minister Nirmala Sitharaman announced plans to restructure PFC and REC to achieve greater scale and efficiency among public sector NBFCs.
In February 2026 , the boards of both companies gave in-principle approval for the merger. On 16 May 2026 , REC’s board reserved the merger proposal pending approval from the President of India. That approval has now been granted.
What the Merger Means for Power Sector Financing
The merger is expected to create a stronger, more efficient public sector financial institution. Once implemented, all assets, liabilities, rights, and obligations of REC will be transferred to PFC . REC will then cease to exist as a separate legal entity under Sections 230-232 of the Companies Act, 2013.
The combined entity will be in a stronger position to:
-
Finance large power and infrastructure projects with greater lending capacity.
-
Improve operational efficiency by merging overlapping functions.
-
Better utilise financial resources by avoiding duplication.
-
Support the government’s energy transition initiatives with dedicated funding.
About Power Finance Corporation (PFC)
Power Finance Corporation was incorporated on 16 July 1986 . It is a Schedule-A Maharatna Central Public Sector Enterprise (CPSE) and one of India’s leading Non-Banking Financial Companies (NBFCs). PFC operates under the administrative control of the Ministry of Power . Its registered office is in New Delhi , with regional offices in Mumbai and Chennai .
PFC was granted Maharatna status in October 2021 . In 2010, the Reserve Bank of India (RBI) classified PFC as an Infrastructure Finance Company (IFC) . The upcoming merger will further strengthen its financial muscle and operational reach.
A Human Touch: The Road to Consolidation
For employees and stakeholders of both companies, the merger brings both hope and uncertainty. A senior official at REC said, “We have worked alongside PFC for years. Now we will become one family. It will take time to adjust, but the combined strength will be good for the power sector.” This merger is not just about balance sheets. It is about building a stronger institution that can fund India’s growing energy needs – from solar parks to rural electrification, and from power transmission to green hydrogen projects.
Conclusion
The presidential approval of the REC-PFC merger marks a significant milestone in India’s efforts to consolidate public sector financial institutions. By creating a larger, more efficient lending entity, the government aims to improve credit flow to the power and infrastructure sectors, reduce duplication, and support the energy transition. Once the merger is complete, REC will cease to exist as a separate company, and PFC will emerge as an even more powerful financier of India’s growth story.
Exam-Focused Points
-
President’s approval date: 10 June 2026 (conveyed by Ministry of Power on 10 June).
-
President of India: Droupadi Murmu.
-
REC full form: Rural Electrification Corporation (now REC Ltd).
-
PFC full form: Power Finance Corporation.
-
Merger type: REC merging into PFC (PFC is the surviving entity).
-
Legal basis: Sections 230-232 of the Companies Act, 2013.
-
REC acquired by PFC in: March 2019 (52.63% stake for ?14,500 crore).
-
Announced in Union Budget: 2026 (by Finance Minister Nirmala Sitharaman).
-
Board in-principle approval: February 2026.
-
REC’s board reserved approval: 16 May 2026.
-
PFC status: Schedule-A Maharatna CPSE, NBFC, Infrastructure Finance Company (RBI classification).
-
PFC incorporated: 16 July 1986.
-
PFC Maharatna status granted: October 2021.
-
Post-merger: REC will cease to exist; all assets and liabilities transferred to PFC.
-
Benefits: Improved operational efficiency, better resource utilization, stronger lending capacity, reduced duplication, enhanced support for energy transition.
Frequently Asked Questions (FAQ)
Q1: Which two companies are merging in this deal?
A: REC Ltd is merging into Power Finance Corporation (PFC). PFC will be the surviving entity.
Q2: Who approved the merger?
A: President Droupadi Murmu approved the merger. The approval was conveyed by the Ministry of Power through a letter dated 10 June 2026.
Q3: What happens to REC after the merger?
A: REC will be dissolved. All its assets, liabilities, rights, and obligations will be transferred to PFC.
Q4: Why is this merger taking place now?
A: The merger was announced in the Union Budget 2026 to improve efficiency and scale among public sector NBFCs. It follows PFC’s acquisition of a majority stake in REC in 2019.
Q5: Is the final share swap ratio decided?
A: As of the announcement, the final share swap ratio has not yet been disclosed.