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Govt Plans PFC-REC Merger to Boost NBFC Lending for Energy Projects

The government plans to restructure and merge Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to create a stronger public sector NBFC. DFS Secretary M Nagaraju stated the merger would enhance capital strength, allowing the entity to borrow more and finance a larger number of projects, particularly in energy and infrastructure. The move, announced in the Union Budget 2026, aims to achieve scale and improve efficiency. The Budget also prioritizes strategic manufacturing sectors to boost GDP contribution and generate future employment.

Key Points: PFC-REC Merger to Strengthen NBFCs, Boost Project Lending

  • NBFC consolidation for scale
  • Stronger balance sheet for more borrowing
  • Boost for infrastructure & energy financing
  • Budget push for strategic manufacturing
  • Focus on employment generation
2 min read

NBFCs merger to enhance capital strength, extend financing to multiple projects: DFS Secretary Nagaraju

DFS Secretary outlines rationale for merging PFC & REC to enhance capital strength and finance more infrastructure and energy projects post-Budget.

"If two NBFCs are financing the same projects in the same sector, it makes rational sense to examine a merger. - M Nagaraju"

New Delhi, February 1

On plans to restructure non-banking financial companies in the government sector, M Nagaraju, Secretary, Department of Financial Services, on Sunday said the consolidation would enhance capital strength, enabling the merged entity to borrow more and extend financing to a larger number of projects.

In a post-Budget conversation with ANI, Secretary DFS Nagaraju said, "Both Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) provide project financing to the public and private sectors in energy. If two NBFCs are financing the same projects in the same sector, it makes rational sense to examine a merger."

He added that consolidation would enhance capital strength, enabling the merged entity to borrow more and extend financing to a larger number of projects. "With a stronger balance sheet, they will be able to lend more and support infrastructure and energy projects more effectively," Nagaraju said.

In the Union Budget 2026, Union Finance Minister Nirmala Sitharaman announced that the government is to restructure the Power Finance Corporation and Rural Electrification Corporation to achieve scale and improve efficiency in the Public Sector NBFCs.

"In order to achieve scale and improve efficiency in the public-sector NBFCs, as a first step, it is proposed to restructure PFC and REC. We are rationalising it. We want to streamline it and therefore we will be taking some steps," she said.

DFS Nagaraju further said the Budget has accorded priority to both manufacturing and services, with special emphasis on strategic manufacturing sectors that have long-term value for the country in terms of Atmanirbhar Bharat and national security.

"These are the sectors that will provide employment in the future, and that is why they have been given priority in the Budget," Nagaraju said.

"Manufacturing currently contributes about 12 per cent to India's Gross Domestic Product (GDP), significantly lower than advanced economies where the share ranges from 26 per cent and above. There is an urgent need to expand India's manufacturing capacity, both to increase its contribution to GDP and to generate employment," he said.

"Manufacturing is one of the largest employment-generating sectors. With a large number of unemployed people across several states, expanding manufacturing is critical," he added.

- ANI

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Reader Comments

P
Priya S
Good to see focus on manufacturing and employment. But I hope this merger doesn't lead to job losses in these NBFCs. Streamlining is fine, but we must protect the livelihoods of existing employees. The goal should be efficiency with empathy.
V
Vikram M
Finally! Reducing duplication and creating a single, stronger entity makes perfect business sense. This should lower borrowing costs and allow for financing of larger, more complex renewable energy projects. A step in the right direction for Aatmanirbhar Bharat.
S
Sarah B
The emphasis on strategic manufacturing for national security is crucial. We cannot rely on imports for critical components forever. Hoping the financing from this merged NBFC actively supports MSMEs in the manufacturing supply chain, not just large corporates.
R
Rohit P
Hope this leads to faster project approvals and disbursements. Sometimes these government NBFCs have very slow processes. If merger brings efficiency, it will benefit states waiting for power and infrastructure funding. 🤞
K
Karthik V
While the intent is good, execution is key. We've seen big mergers in the banking sector with mixed results. The government must ensure a smooth integration with clear accountability. The focus should remain on financing viable projects, not just creating a big entity.

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