India’s power sector financing space just moved one step closer to a landmark consolidation. Rural Electrification Corporation (REC) informed the stock exchanges this week that the Reserve Bank of India has issued a No Objection Certificate (NOC) for its proposed merger with Power Finance Corporation (PFC), clearing one of the biggest regulatory hurdles in the deal’s path.
The clearance, granted subject to conditions specified by the RBI, advances the plan to fold two of the country’s largest power sector lenders into a single financing giant with a combined loan book of more than Rs 11 lakh crore.
What the RBI clearance means
The RBI’s no-objection certificate does not complete the merger. In its filing, REC stated plainly that the scheme remains subject to other statutory and regulatory approvals and to the fulfilment of conditions attached to the scheme, including the approval of the respective shareholders and creditors of both companies.
Still, the NOC matters. As both companies are registered NBFCs regulated by the RBI, the central bank’s clearance was among the first regulatory gates the scheme had to cross. With it granted, the transaction can now proceed toward shareholder meetings, creditor approvals, and the remaining regulatory sign-offs.
- NOC received: October 15, 2026 (disclosed October 16, 2026)
- Board approval date: June 28, 2026, by both boards
- Transferor company: REC Limited
- Transferee company: Power Finance Corporation Limited
- Combined loan book: Over Rs 11 lakh crore
The deal structure: 88 PFC shares for 100 REC shares
Under the scheme of amalgamation approved by the two boards, REC Limited will merge into and with PFC. The share exchange ratio, communicated to the exchanges in July 2026 after the board approvals, stands at 88 fully paid-up equity shares of PFC, each of Rs 10 face value, for every 100 fully paid-up equity shares of REC, also of Rs 10 face value.
The record date for determining eligible REC shareholders will be fixed later by the boards of the two companies. The scheme is being pursued under Sections 230 to 232 of the Companies Act, 2013, and other applicable provisions of law.
Heavyweight advisers are steering the transaction. Deloitte Touche Tohmatsu India is the transaction and tax adviser while Cyril Amarchand Mangaldas is the legal adviser to both companies. RBSA Valuation Advisors and Ernst & Young Merchant Banking Services provided the joint valuation reports for PFC and REC respectively, and SBI Capital Markets and Nuvama Wealth Management gave fairness opinions on the valuation.
Why the government wants this merger
Both companies are government-owned lenders that have historically served the same constituency: India’s power sector. PFC funds generation, transmission and distribution projects, while REC has a deep footprint in rural electrification, state utilities, and increasingly in renewables and infrastructure lending beyond pure power.
Merging the two creates scale, reduces overlapping operations, and gives the combined entity a bigger balance sheet to fund the energy transition. India’s power sector needs enormous capital over the next decade, from renewable capacity additions to grid modernisation and distribution reforms. A single Rs 11 lakh crore lender will be better positioned to write large-ticket cheques and price risk efficiently.
One condition runs through the entire plan: the merged entity must continue to qualify as a government company under the Companies Act, 2013, with the Government of India retaining majority voting rights and control, directly or indirectly.
What remains before the merger is done
The RBI’s NOC is a milestone, not the finish line. Several approvals are still pending:
- Other statutory and regulatory clearances applicable to the scheme
- Approval of the shareholders of both companies
- Approval of the creditors of both companies
- Fulfilment of the conditions specified in the scheme itself
Market watchers will now look for the next public milestone, likely the announcement of shareholder meetings or the record date for the share swap. Until then, investors in both counters should watch regulatory filings closely rather than trading on the headline alone.
FAQs
What is the PFC-REC merger?
REC Limited is proposed to merge into Power Finance Corporation Limited under a scheme approved by both boards on June 28, 2026. The combined entity would have a loan book of over Rs 11 lakh crore, making it one of India’s largest infrastructure financiers.
What did the RBI clear on October 15?
The RBI issued a No Objection Certificate for the proposed merger, subject to specified conditions. It clears a key regulatory gate but does not complete the transaction.
What is the share exchange ratio?
88 fully paid-up PFC equity shares of Rs 10 each for every 100 fully paid-up REC equity shares of Rs 10 each, as on a record date to be announced.
Is the merger complete now?
No. The scheme still needs other statutory and regulatory approvals, plus the approval of shareholders and creditors of both companies.
Will the merged company remain government-owned?
Yes. The scheme requires that the merged entity continues to qualify as a government company, with the Government of India retaining majority voting rights and control.
Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do their own research or consult a financial adviser before making investment decisions.
Keep watching Informeia for the next updates on the PFC-REC merger as the remaining approvals come through.
