The approvals came after the board meetings of both companies concluded late on Sunday, paving the way for creating of India’s largest power sector financing institution with a combined loan book of more than Rs 11 lakh crore.

PFC owns a 52.6% stake in REC. The Centre owns 55.99% in PFC but doesn’t directly own a stake in REC.

“The share exchange ratio for the proposed merger of REC into PFC shall be 88 equity shares of PFC of Rs10 each fully paid up for every 100 equity shares of REC of Rs 10 each,” information on stock exchanges by the companies said.

The scheme provides for merger of the companies by absorption of REC into PFC with effect from April 1.

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The merger will now require approvals from shareholders, stock exchanges, the Securities and Exchange Board of India (SEBI), the National Company Law Tribunal (NCLT) and other statutory authorities before becoming effective.
The Centre had announced plans to consolidate the two state-owned lenders to improve operational efficiency, strengthen their balance sheet and create a larger institution capable of meeting the power sector’s growing financing requirements.The merger process gathered pace after the boards of the two companies granted in-principle approval earlier this year. The government subsequently obtained the President’s approval to proceed with the amalgamation and appointed SBI Capital Markets as merchant banker and RBSA Valuation Advisors as the independent valuer for determining the share exchange ratio.

PFC and REC are focused on the power sector, funding generation, transmission, distribution, renewable energy, battery storage and other energy infrastructure projects. The combined entity is expected to play a larger role in financing India’s energy transition and the massive investment planned in electricity infrastructure over the coming decade.

The government in the FY27 budget announced that it seeks to achieve scale and improve efficiency in public sector NBFCs and as a first step it proposed to restructure PFC and REC.

The boards of both companies subsequently approved a merger plan, stating that the new entity will remain a government company, clearing the air over ownership.