Budget 2026: Finance Minister Announces Restructuring Of PFC, REC

Union Finance Minister Nirmala Sitharaman announced the restructuring of public sector-owned Power Finance Corporation (PFC) and its arm Rural Electrification Corporation (currently REC Ltd.) as a part of its mission to improve efficiency in state-owned non-banking finance entities.

“The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption. In order to achieve scale and improve efficiency in the Public Sector NBFCs, as a first step, it is proposed to restructure the Power Finance Corporation and Rural Electrification Corporation,” Sitharaman said while delivering her speech on the Union Budget for the financial year 2026-27.

The aim of restructuring PSU NFBCs could help improve the overall efficiency in operation as well as in capital utilisation, experts said. This move is also seen as providing effective support to critical sectors like infrastructure and energy transition, and enabling long-term credit flow in capital-intensive sectors.

These state-owned NBFCs, called the ‘Maharatna’ NBFCs, are controlled by the power ministry. These NBFCs support the long-term capital requirements of India’s power sector.

PFC acquired a 52.6 per cent stake in REC in May 2019 and is currently a promoter of the company. These two companies were expected to merge by 2021. However, the Reserve Bank of India’s financing limits for a single NBFC lender to a single project led to a fallout of the merger.

The then REC chairman and managing director, Vivek Kumar Dewangan, had told Moneycontrol that a merger would limit the lending and borrowing capacities of both entities and was not good for either at that point. “A merger limits our borrowing capacity, which in turn restricts our lending capacity. So, a merger is not an option anymore,” Dewangan had said.

The Budget 2026 announcement did not provide any details on how the restructuring will happen. However, experts were of the view that a thoughtful execution of the reforms through better scale, governance and technology could help improve credit delivery and resilience throughout the financial ecosystem.

Immediately after the announcement by Sitharaman, shares of PFC rose over 6 per cent on the National Stock Exchange, but erased most of the day’s gains at close, ending 0.3 per cent higher at Rs. 380.6 per share. Meanwhile, shares of REC also rose immediately by 4 per cent, but a broader fall in markets led the shares to end 1.5 per cent lower at Rs. 358.75 per share on the NSE.