Reserve Bank of India · Regulatory Approval
RBI Grants No-Objection Certificate for the REC–PFC Merger: India’s Biggest Power-Finance Consolidation Moves a Step Closer
REC Ltd disclosed on 15 October 2026 that the Reserve Bank of India has cleared — with conditions — its merger into Power Finance Corporation under Sections 230–232 of the Companies Act, 2013. Shareholder, creditor and NCLT approvals are still to come.
Key change in one line: The central-bank hurdle is out of the way — RBI’s conditional NoC lets the REC–PFC amalgamation scheme proceed to shareholder and creditor votes and, eventually, the NCLT. But the merger is not complete: several approvals and a tribunal sanction still stand between the announcement and a single merged lender.
What happened
On 15 October 2026, REC Limited informed the stock exchanges — under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 — that it had received a No-Objection Certificate (NoC) from the Reserve Bank of India for the proposed merger of REC Limited (the transferor company) with and into Power Finance Corporation Limited (the transferee company). PFC filed a parallel intimation with the exchanges the same day, confirming receipt of the RBI clearance for the same scheme of amalgamation.
The RBI’s NoC is, as the filings put it, “subject to certain instructions and conditions specified therein.” The specific conditions have not been made public — they sit inside the RBI’s letter itself, which is not a published document — so investors and analysts will have to wait for the scheme documents filed with the NCLT to see whether any condition materially alters the deal’s contours.
The intimation refers back to the companies’ earlier disclosure dated 28 June 2026, when the boards of both REC and PFC approved the scheme of amalgamation. That makes the RBI clearance the first of the big statutory gates to fall since the boards signed off, roughly three and a half months ago.
The deal terms, as announced
One nuance worth noting: the 15 October intimation itself does not restate the 88:100 swap ratio — that ratio comes from the 28 June 2026 board-approval disclosure that the intimation cross-refers to. Nothing in the NoC intimation suggests the ratio has changed, but the definitive, current terms will be in the scheme document placed before shareholders.
Why the RBI’s NoC matters here: Both REC and PFC are systemically important non-banking financial companies (NBFCs) in the power-infrastructure lending space, and any amalgamation of regulated financial entities needs the sectoral regulator’s comfort before the NCLT process can meaningfully advance. The RBI’s NoC is therefore not a formality — it is the regulatory gate that determines whether the scheme is even fit to be put to shareholders. With it in hand, the companies can now move to the shareholder/creditor meeting stage under the tribunal-supervised process.
Old vs new: what the merger changes
Today, REC and PFC operate as two separate listed lenders, both Navratna public-sector NBFCs under the Ministry of Power, both financing generation, transmission, distribution and renewable-energy projects across India. PFC already holds a majority stake in REC — it acquired the Government’s holding in 2019 — so the two are already linked by ownership; the scheme of amalgamation would convert that parent–subsidiary relationship into a single consolidated balance sheet.
Who is affected
- REC shareholders: the 88:100 swap ratio fixes what they get. Anyone holding REC shares on the record date (to be announced) will receive PFC shares instead — no action is needed from them beyond holding through the process, but the ratio and the conditions attached to the RBI NoC are the numbers to scrutinise in the scheme document.
- PFC shareholders: their company absorbs REC’s assets and liabilities; the swap will expand PFC’s equity base, so existing PFC holders face dilution offset by the consolidated book.
- Borrowers — discoms, generators, transmission and renewable developers: in the short term, nothing changes — loan agreements, sanctions and disbursement pipelines continue as before. Over time, a single larger lender could mean unified credit policies and bigger ticket sizes for large infrastructure projects.
- Bondholders and lenders to either company: schemes under Sections 230–232 require creditor meetings and approvals; the terms of outstanding bonds and borrowings will be addressed in the scheme. Watch the creditor-meeting notices for any proposed modifications.
- Employees of both companies: amalgamation schemes typically carry over employment on no-less-favourable terms, but the exact treatment will be spelled out in the scheme document — that detail is not stated in the filings seen so far.
What happens next — the road to completion
The filings are explicit that the RBI NoC is a milestone, not the finish line. The merger still requires:
- Shareholder approvals of both REC and PFC — scheme meetings convened under NCLT directions, typically needing a majority in number representing three-fourths in value of those voting.
- Creditor approvals of both companies — the filings name creditors expressly alongside shareholders.
- Other statutory and regulatory approvals — the filings’ phrase; for a 230–232 scheme of two listed PSUs this would ordinarily include stock-exchange observations and sectoral nods as applicable.
- NCLT sanction — inherent to any Sections 230–232 scheme; the tribunal must sanction the scheme before it becomes effective, and the effective/appointed date will be fixed in the sanctioned scheme (not stated in the intimations).
Only after the NCLT sanctions the scheme and the certified order is filed with the Registrar of Companies does the amalgamation legally take effect. Timelines for tribunal-sanctioned PSU mergers typically run several months from the shareholder-vote stage — treat any “completion by” date in press coverage as speculation unless the companies announce it.
⚠️ The one open question: the RBI’s “instructions and conditions.” The NoC is conditional, and the conditions are not public. In bank/NBFC mergers, such conditions can touch on governance, capital, asset classification or timelines — but none of that is confirmed here. Until the scheme document or a further disclosure spells them out, do not assume the NoC was unconditional.
What to watch from here
- The scheme document and explanatory statement circulated for shareholder meetings — this is where the swap ratio, valuation report, appointed date and treatment of employees, creditors and bondholders become concrete.
- Any further disclosure on the RBI’s conditions — the single biggest known unknown in the deal right now.
- NCLT filing and hearing dates — the real timetable for completion starts when the tribunal takes up the first-motion application.
- Record date announcement — REC shareholders should watch for the record date fixing who receives the 88:100 swap.
Frequently asked questions
Q1. Has the REC–PFC merger been completed?
No. On 15 October 2026 the RBI granted a conditional No-Objection Certificate — one regulatory gate. The scheme still needs shareholder and creditor approvals of both companies, other statutory/regulatory approvals, and NCLT sanction before it takes effect.
Q2. What is the share swap ratio for REC shareholders?
88 fully paid-up PFC equity shares (₹10 each) for every 100 fully paid-up REC equity shares (₹10 each) held, as set in the 28 June 2026 board-approved scheme. The ratio will be reconfirmed in the scheme document placed before shareholders.
Q3. Is the RBI’s NoC unconditional?
No — the filings state the NoC is “subject to certain instructions and conditions specified therein.” The specific conditions have not been disclosed publicly.
Q4. I hold REC shares. Do I need to do anything now?
Not yet. Watch for the shareholder-meeting notice (you will get to vote on the scheme) and, later, the record-date announcement that fixes who receives the PFC shares. Do not act on rumours about dates — rely on the companies’ exchange filings.
Q5. Which company survives the merger?
Power Finance Corporation Limited is the transferee company — REC merges into PFC, and the surviving listed entity will be PFC.
Q6. Will my existing loans from REC or PFC change?
Existing loan agreements continue on their current terms; an amalgamation transfers the transferor’s contracts to the transferee by operation of the sanctioned scheme. Any change to terms would have to come through the scheme itself — check the scheme document when published.
Sources
- Primary: REC Limited — “Intimation of receipt of No Objection Certificate from the Reserve Bank of India” under Regulation 30, SEBI (LODR) Regulations, 2015, dated 15 October 2026 (BSE filing; BSE scrip 532955). Filing text verified via Google’s index of the BSE-hosted filing and verbatim reproductions.
- Power Finance Corporation Limited — parallel intimation of RBI NoC receipt, 15 October 2026 (BSE filing).
- BSE corporate announcements page for REC Ltd (scrip 532955) — listing of the 15 October 2026 announcement.
- Sections 230–232, Companies Act, 2013 (scheme of amalgamation framework); Regulation 30, SEBI (LODR) Regulations, 2015 (disclosure basis).
- Press reports (pointer-level only): PSU Connect and The Hindu BusinessLine, 16 October 2026 — used to corroborate filing text, not as primary sources.
Verified against the official exchange filings on 16 October 2026. The RBI’s specific NoC conditions, the exact BSE dissemination timestamp, and the scheme’s appointed/effective date are not disclosed in the intimations. This article is for information only and is not investment advice. Komal, the publisher, is not a qualified Company Secretary.
