Govt sets up high-level committee to monitor progress of PFC-REC merger

High-level committee and working group to oversee personnel integration, restructuring, technology alignment and regulatory approvals for the proposed merger

The power ministry has constituted a high level committee to monitor the progress of the merger of Power Finance Corporation (PFC) and REC Ltd. The committee comprises the Chairmen of the two companies as members and the Joint Secretary (distribution) of the power ministry as convenor.

 

Parallelly, the ministry has set up a working group to study the modalities of the merger, with one executive director each from PFC and REC, and the power ministry’s director (distribution) as the convenor.

 

It will submit recommendations on personnel integration including harmonisation of pay, promotion and inter-se-seniority; corporate and functional restructuring; supervision of technology integration; harmonising stakeholder interests, resolving inter-entity issues and monitoring the progress on approval of regulatory authorities.

 

The working group is required to meet at least once a week and present its recommendations to the high-level committee.

 

PFC had acquired a 52.63 per cent equity stake in REC in 2019, after which, the latter became a subsidiary of the financier. In her Budget speech this year, Finance Minister Nirmala Sitharaman had announced the proposal to restructure PFC and REC, with the objective of achieving scale and improving efficiency among public sector NBFCs.

 

The boards of the two companies gave in-principle approval for the restructuring in the form of a merger on February 6.  

The companies expect to manage the transition into a merged entity smoothly without any material constraints, per a joint statement issued last week. Post-merger, a single-entity exposure limit of 20 per cent will apply to the new entity.

 

A single-entity exposure limit for a financing company is a regulatory ceiling capping the total credit and investment exposure to a single borrower, typically set as a percentage of the entity's capital funds, often Tier-1 capital.