RBI Clears PFC and REC Merger for Rs 11 Lakh Crore Lender

The Reserve Bank of India has issued a No Objection Certificate for the merger of REC Limited into Power Finance Corporation, REC disclosed in a BSE filing on Friday. The certificate is dated October 15, 2026. The merged lender will have an aggregate loan book of over Rs 11 lakh crore.

Both companies are state-run non-banking finance companies. Both lend to the power sector. Their boards approved the merger scheme on June 28, 2026, under Sections 230 to 232 of the Companies Act, 2013.

The terms of the deal

Under the share swap, REC shareholders will get 88 fully paid PFC shares of Rs 10 each for every 100 REC shares of Rs 10 each. The companies informed exchanges of the ratio on July 29, 2026.

The RBI No Objection Certificate is subject to conditions set by the central bank. The merged company must remain a government company, with the Government of India keeping majority control.

The adviser list is long. Deloitte Touche Tohmatsu India handles transaction and tax work. Cyril Amarchand Mangaldas is the legal adviser. RBSA Valuation Advisors and Ernst and Young Merchant Banking Services are the joint valuation advisers. SBI Capital Markets and Nuvama Wealth Management gave the fairness opinions.

Why it matters

India funds its power build-out in large part through these two lenders. Merging them creates one lender with a loan book above Rs 11 lakh crore, focused on a single sector. A single balance sheet can fund larger projects and removes overlap between two state lenders that often serve the same borrowers. It also puts more weight on one institution. If power sector loans turn bad, the risk sits in one place.

The structure keeps public control in place. The merged firm must stay a government company. The share swap sets how REC owners move into PFC stock, at 88 shares for every 100 they hold now.

What happens next

The RBI clearance is one step, not the finish. The merger still needs shareholder and creditor approvals and other statutory approvals. The record date for the share swap will be set later. Until those votes and approvals land, PFC and REC keep operating as separate lenders. Investors will watch the conditions attached to the RBI certificate and the timetable the companies set for the shareholder meetings.

The disclosure on Friday put the central bank step on the public record. Both lenders work in the same sector, both are state run, and both will now plan around a single merged future while the remaining approvals run their course through shareholders, creditors and regulators.

Sources The Hindu BusinessLine: https://www.thehindubusinessline.com/companies/rbi-gives-noc-to-pfc-rec-merger/article71591605.ece Indian PSU: https://indianpsu.com/rec-pfc-merger-rbi-noc/