Power Ministry Sets Up Panels To Steer PFC And REC Merger Process

The Ministry of Power has formed two separate panels to examine and guide the proposed merger of Power Finance Corporation (PFC) and REC Limited. The move is aimed at restructuring the two state-run non-banking financial companies (NBFCs) and ensuring a smooth consolidation process.

According to official orders issued on Thursday, a working group has been created to study the detailed framework of the merger. The group includes one executive director each from PFC and REC, along with the ministry’s Director (Distribution). This group will look into the operational and structural aspects of combining the two financial institutions.

A separate high-level committee has also been set up to oversee the overall merger process. This panel comprises the chairpersons of PFC and REC, while the Joint Secretary (Distribution) in the Power Ministry will act as the convenor. The ministry has informed the concerned officials as well as the chairpersons and managing directors of both companies about the formation of these panels through separate orders.

The working group has been given the responsibility to examine several important areas. These include integration of personnel, harmonization of pay scales, and alignment of promotion policies. It will also review corporate and functional restructuring, including changes in reporting lines and supervision systems. Technology integration across the combined entity will also be assessed to ensure smooth operations after the merger.

In addition, the group will focus on aligning stakeholder interests and resolving any inter-entity issues that may arise during the merger process. It will also monitor progress in obtaining approvals from regulatory authorities. The working group is expected to meet at least once every week and will submit its recommendations to the high-level committee for further direction.

The move follows an announcement made by Finance Minister Nirmala Sitharaman during the Union Budget 2026-27 presentation on 1 February 2026. She had proposed restructuring PFC and REC as part of broader reforms aimed at strengthening state-run NBFCs. After the announcement, the boards of both companies approved the proposed merger.

The consolidation of PFC and REC is significant because together they have a combined loan book of about ₹11.5 lakh crore. The merger is expected to create the single-largest lending entity in the power sector. The government believes that aligning human resources, business operations, and regulatory compliance will help improve operational efficiency and strengthen the balance sheets of these public sector financial institutions.