Power Finance Corporation (PFC) and REC Limited’s merger is moving ahead in full steam, with execution plans being laid out to meet the statutory and regulatory requirements.

After REC became a subsidiary of PFC, exposure under the Reserve Bank of India’s Large Exposure Framework was capped at the group limit of 25% of banks’ Tier I capital. Both entities have operated comfortably within these limits for over five years. Post-merger, a single-entity exposure limit of 20% will apply.

The aggregate Tier I capital of the top ten Indian banks stood at approximately ₹18 trillion (~$198.66 billion) as of March 31, 2025, providing adequate headroom for additional borrowings. Management expects the transition to the new structure to be smooth without material constraints.

The merger structure is currently being finalized. External agencies, including consultants, valuation experts, and legal advisors, will be engaged to ensure the process is executed in a structured, timely, and compliant manner, subject to necessary regulatory approvals.

PFC acquired 52.63% of the Government of India’s stake in REC, making REC a subsidiary of PFC.

The PFC Board earlier this month acknowledged the Union Budget 2026–27 proposal to restructure public sector Non-Banking Financial Companies (NBFCs) and accorded in-principle approval for the merger of PFC and REC.

The merged entity will continue to maintain its status as a government company, and the Government of India will continue to retain its control over the merged entity, including the right to appoint and remove its board members.

Both entities, as NBFCs, adhere to the Reserve Bank of India’s credit concentration norms for single and group borrower exposures, which are linked to their Tier I capital.

PFC said given the strong net worth of both entities, it does not foresee any breach of borrower exposure norms.

The current funding mix of both entities consists of approximately 18% domestic bank or financial institutions’ borrowings, 25% foreign currency borrowings, and 57% domestic bond borrowings.

Last month, PFC launched Tranche I of its public issue of secured, listed, and redeemable non-convertible debentures, aiming to raise ₹50 billion (~$554.18 million) as part of its broader ₹100 billion (~$1.108 billion) shelf program.