RBI Grants No Objection Certificate for REC-PFC Merger

The Reserve Bank of India has given a No Objection Certificate (NOC) to the proposed merger of REC Limited into Power Finance Corporation (PFC). An NOC is a regulatory clearance needed in cases like NBFC mergers, overseas investments and closure of payment systems, and it is different from a No Due Certificate. REC received the RBI’s NOC on October 15, 2026, after both boards approved the merger on June 28, 2026. The combined entity will have a loan book of over ₹11 lakh crore, and shareholders will get 88 PFC shares for every 100 REC shares. The deal still needs shareholder, creditor and other statutory approvals.

What Does an RBI No Objection Certificate Mean?

An RBI No Objection Certificate (NOC) is a formal clearance from the central bank. It shows that the RBI has no objection to a planned action, such as a merger or restructuring. It is a regulatory step and does not complete the deal on its own.

Key Scenarios Requiring an RBI NOC

1. NBFC mergers and amalgamations

Before an NBFC goes to the National Company Law Tribunal (NCLT) for a merger, amalgamation or takeover, it must get the RBI’s prior NOC. This also applies when a change in shareholding is 26% or more, or when there is a major shift in management. The RBI checks whether the deal is sound and protects depositors and the financial system. The REC-PFC merger is a recent example.

2. Overseas investments by NBFCs

An NBFC that wants to open an overseas branch, set up a subsidiary or joint venture abroad, or make a foreign investment needs prior written approval from the RBI’s Department of Non-Banking Supervision (DNBS). This lets the RBI monitor foreign exposure and risks.

3. Voluntary surrender of authorisation by payment system operators

 A Payment System Operator (PSO) that wants to stop its business or surrender its Certificate of Authorisation cannot simply exit. It must get specific clearances, including an NOC from bodies such as the BBPCU where applicable. This protects customers and keeps payment services running smoothly.

4. Opening current accounts

Earlier, banks asked for an NOC from the existing lending bank before opening a current account for a borrower with credit facilities. The rules have since changed, and banks now mainly check data from the Central Repository of Information on Large Credits (CRILC).

Difference between No Due Certificate vs No Objection Certificate

REC-PFC Merger Receives RBI Clearance

In a BSE filing on Friday, REC said it received the RBI’s NOC on October 15, 2026, subject to the RBI’s conditions. The scheme still needs other statutory and regulatory approvals, including approval from the shareholders and creditors of both companies.

Merger Scheme Approved by Both Boards

• Board approval: The boards of REC (transferor) and PFC (transferee) approved the merger on June 28, 2026.
• Share exchange ratio: Shareholders will get 88 PFC shares of ₹10 each for every 100 REC shares of ₹10 each.
• Combined size: The merged entity will have a loan book of over ₹11 lakh crore.
• Advisors: Deloitte Touche Tohmatsu India is the transaction and tax advisor. Cyril Amarchand Mangaldas is the legal advisor.
• Valuation and fairness opinions: RBSA Valuation Advisors (PFC) and Ernst & Young Merchant Banking (REC) prepared the joint valuation reports. SBI Capital Markets and Nuvama Wealth Management gave the fairness opinions.

About REC Limited and Power Finance Corporation

REC Limited, earlier called Rural Electrification Corporation, was set up to finance rural electrification and power projects. Power Finance Corporation (PFC) is a central public sector enterprise under the Ministry of Power and funds the power sector. After the merger, the lending operations and assets of both companies will come together under PFC.