Two state-owned power financiers move to merge into an ₹11-lakh-crore giant

The boards of Power Finance Corporation and REC approved a scheme to merge REC into PFC — creating a single power-sector financier with a loan book of over ₹11 lakh crore, while keeping it a government company.

What happened

• The Boards of Power Finance Corporation (PFC) and REC Limited approved a Scheme of Merger to merge REC (transferor) into PFC (transferee) under Sections 230-232 of the Companies Act, 2013.
• The merger would create a financing entity with an aggregate loan book of over ₹11 lakh crore.
• The scheme is conditional on all requisite approvals — shareholders, creditors, regulators and government — and on the merged entity continuing to qualify as a 'Government Company' with the Centre retaining majority voting rights and control.
• The share-exchange ratio is 88 PFC shares for every 100 REC shares (₹10 face value each).
• Both PFC and REC are Maharatna CPSEs and the principal lenders to India's power and infrastructure sector — the consolidation aims to build a stronger development-finance institution for the energy transition.

For Prelims

• PFC & REC: Power Finance Corporation and REC Ltd (formerly Rural Electrification Corporation) — Maharatna CPSEs under the Ministry of Power; the main non-banking financiers (NBFC-IFCs) for power generation, transmission, distribution and infrastructure. PFC is REC's holding company (acquired the government's REC stake in 2019).
• Maharatna: The highest CPSE category, giving the largest financial/operational autonomy (criteria include high turnover and net worth); other tiers are Navratna and Miniratna.
• Scheme of merger (Companies Act, Sections 230-232): The legal route for mergers/amalgamations, requiring approval of boards, shareholders/creditors, and the NCLT (and sectoral regulators).
• 'Government Company': Under Section 2(45), Companies Act 2013 — a company with at least 51% paid-up capital held by the government; the merged entity must retain this status and government control.
• Share-exchange ratio: The basis on which the transferor's shareholders receive the transferee's shares (here 88:100), set per an independent valuation.
• Why it matters: A consolidated power financier offers scale, lower borrowing costs and stronger capacity to fund the energy transition (renewables, grid, distribution reform).
• Don't confuse: This is a board-approved scheme — still subject to shareholder, creditor, regulatory and NCLT approvals; PFC and REC are NBFC-IFCs (infrastructure finance), not banks.

For Mains

Syllabus: GS3.9 · GS3.1 · Linkage L2