The decks have been cleared for the merger of REC Limited with the Power Finance Corporation (PFC), with the boards of the two government-owned companies approving the proposal made in the Union Budget 2026-27.

In separate filings on the BSE, the two companies said that their boards had given the go-ahead for the PFC to make an application to the President of India for the merger of REC into PFC at such a share exchange ratio as may be determined by valuers appointed for the purpose.

This is subject to maintaining the merged entity’s status as a ‘Government Company,’ including by way of issuance of necessary securities to, and the infusion of capital by the Union government.

Upon the merger becoming effective following the President’s approval, all the assets and liabilities of REC will be transferred to PFC, and REC will stand dissolved.

The government holds majority stakes in both companies. Following an announcement in the Union Budget, PFC acquired 52.63% of the Union government’s stake in REC in February, making it a subsidiary of PFC.

The Finance Minister, Nirmala Sitharaman, had proposed merging the two non-banking financial companies to achieve scale and improve efficiency.

The merger will create a giant lender to the power sector and is expected to boost access to finance for renewables. Traditionally, renewable energy projects and the power distribution sector have been significant beneficiaries of lending from the two agencies.

PFC’s consolidated loan asset book stood at ₹11.64 trillion (~$121.73 billion), and REC’s loan book grew to ₹5.84 trillion (~$61.78 billion) as of March 31, 2026. Renewable energy accounted for 16% of PFC’s loan book. It had supported approximately 66 GW of renewable energy capacity, equivalent to about 24% of India’s non-fossil fuel-based installed capacity, by the end of the financial year (FY) 2026.

The distribution sector accounted for 31% of REC’s total disbursements at the end of FY 2026, followed by renewable energy at 14% and conventional generation at 12%.