Acquisition
Power Ministry Sets Up Panel to Monitor PFC-REC Merger
•February 19, 2026
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Participants
Why It Matters
Creating the country’s largest power‑sector financier reshapes infrastructure funding and intensifies competition in the NBFC space, directly influencing project pipelines and capital availability.
Key Takeaways
- •Panel monitors PFC‑REC merger weekly.
- •Combined loan book ~₹11.5 lakh crore.
- •40% exposure to power distribution.
- •GNPA ratio projected at 1.3%.
- •Merger targets AI‑enabled data centre funding.
Pulse Analysis
The government’s decision to form a dedicated monitoring panel underscores the strategic importance of consolidating two Maharatna NBFCs. By uniting Power Finance Corporation and Rural Electrification Corporation, India aims to create a single, well‑capitalised lender capable of underwriting mega‑projects that individual entities might struggle to fund. This aligns with the Finance Minister’s FY27 budget vision of a more streamlined, efficient financing ecosystem for the power sector, while also signalling confidence in the country’s long‑term energy transition.
Financially, the merged entity would command a loan portfolio of roughly ₹11.5 lakh crore, placing it on par with the seventh‑largest Indian bank. With 40% of assets tied to power distribution and a balanced mix of conventional, renewable, and infrastructure exposure, the institution promises diversified risk. A projected GNPA of 1.3% and a trailing ROA near 3% suggest a healthy asset quality, though integration challenges—such as harmonising pay scales and seniority—remain critical to preserving that stability.
Beyond balance‑sheet size, the merger positions the new NBFC as a catalyst for next‑generation infrastructure, notably AI‑enabled data centres that demand substantial, long‑term financing. By consolidating expertise and capital, the entity can offer tailored funding solutions, accelerate project execution, and attract private‑sector participation. As India pushes for greater digitalisation and renewable integration, this financing behemoth could become a pivotal conduit for both traditional power assets and emerging technology‑driven ventures, shaping the country’s energy landscape for the next decade.
Deal Summary
The Indian Power Ministry created a high‑level committee to track the progress of the proposed merger between Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), which have in‑principle approved the deal. The panel will meet weekly to oversee integration, regulatory approvals, and restructuring as the two Maharatna NBFCs aim to form a financing behemoth for large‑scale power projects, including AI‑enabled data centres.
Article
Source: The Hindu BusinessLine – Companies
Power Ministry forms panel to monitor PFC‑REC merger progress
By BL New Delhi Bureau
Updated – February 19, 2026 at 05:36 PM
The Power Ministry has created a three‑member high‑level committee to monitor the progress of the proposed merger between Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). The merger will create a power‑sector financing behemoth capable of funding large‑ticket projects, including AI‑enabled data centres.
The three‑member panel includes the Chair‑Man‑Directors of the two public‑sector non‑banking financial companies (NBFCs) and the Joint Secretary (Distribution) from the Power Ministry. The Ministry has tasked the working group to study the modalities for the merger of PFC and REC.
“The committee shall receive regular progress reports from the working group. It may meet once every week and take stock of various issues so as to ensure smooth merger of the two entities,” the Power Ministry order said.
The working group shall study and provide recommendations on personnel integration, including harmonisation of pay, promotion matters and inter‑seniority. It will also suggest corporate and functional restructuring of the organisation, covering the reporting structure, supervision of technology integration, harmonising stakeholder interests, resolving inter‑entity issues, and monitoring progress on regulatory approvals.
“The Group may meet at least once every week and present its recommendations to the High‑level Committee constituted w.r.t. merger of PFC and REC,” the order added.
Earlier this month, the PFC and REC boards in‑principle approved the merger, which will eventually liquidate REC post‑merger. This follows the Finance Minister’s FY27 Budget speech proposing the merger of the two NBFCs.
The two Maharatna companies each manage a loan book of roughly ₹6 lakh crore, with about 40 % of each book comprising loans to the distribution segment. Both have 12‑15 % exposure to renewable‑energy generation projects and have diversified into non‑power sectors such as infrastructure financing for roads and ports.
The merger will create a financing behemoth focused on funding large‑scale and complex projects in the power and related infrastructure space, including AI‑enabled data centres.
Loan book
According to a BusinessLine explainer, the merged entity could have a loan book of about ₹11.5 lakh crore—comparable in size to Canara Bank, the seventh‑largest bank in India.
When broken down, the loan book would consist of:
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40 % exposure to distribution
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29 % to conventional generation
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14 % to renewables
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8 % to transmission
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6 % to infrastructure and logistics
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3 % to miscellaneous loans
Based on the borrower, loans to state‑owned entities and the private sector would represent roughly 80 % and 20 % of the portfolio, respectively. The combined entity’s gross non‑performing asset (GNPA) ratio would be about 1.3 %. These figures are derived from Q3 FY26 financials. Return on assets on a trailing 12‑month basis (up to H1 FY26, where balance sheets are disclosed) could be around 3 %.
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