The proposed merger of REC with state-owned shadow banking firm Power Finance Corporation (PFC) has hit a roadblock and is not likely to happen in near future as it would violate RBI norms on the exposure of non-banking financial companies (NBFCs), according to sources.
As per the RBI norms, debt exposure of an NBFC in a project cannot exceed 25%. The exposure of Power Finance Corporation (PFC) and REC as a merged entity would exceed the limit of 25% in any existing project as the two firms have been financing power sector projects.
After the merger, the new entity will be required to reduce its exposure in a project to 25% which may not be feasible.
