UPSC Prelims Practice Questions — Approval of Merger scheme by Board of Directors of PFC and REC

Q1. With reference to the regulatory status of Power Finance Corporation (PFC) and REC Limited, consider the following statements. Which of the above is/are NOT correct?

  1. PFC was accorded 'Maharatna' status in 2021.
  2. REC was accorded 'Maharatna' status in 2019.
  3. Both PFC and REC are registered with the RBI as Infrastructure Finance Companies (IFCs).
  4. Both PFC and REC function under the administrative control of the Ministry of Power.
  • A. 2 only
  • B. 1 and 2
  • C. 2 and 4
  • D. 4 only

Q2. With reference to how Power Finance Corporation (PFC) and REC Limited are classified, consider the following. Which of the above is/are correctly identified?

  1. Both are Maharatna Central Public Sector Enterprises.
  2. Both are regulated by the RBI as Non-Banking Financial Companies (NBFCs).
  3. Both are classified as Infrastructure Finance Companies (IFCs).
  4. Both are Public Sector Banks governed by the Banking Regulation Act, 1949.
  • A. 1, 2 and 3
  • B. 1, 2 and 4
  • C. 2, 3 and 4
  • D. 1, 3 and 4

Q3. With reference to the structure of the PFC–REC Scheme of Merger approved in 2026, consider the following statements. Which of the above is/are NOT correct?

  1. REC is the transferor company and PFC the transferee company.
  2. The merger is undertaken under Sections 230 to 232 of the Companies Act, 2013.
  3. REC shareholders receive 88 equity shares of PFC for every 100 REC shares held.
  4. On the merger taking effect, PFC will be dissolved and REC will be the surviving entity.
  • A. 1 only
  • B. 4 only
  • C. 3 and 4
  • D. 2 and 4

Q4. A scheme of amalgamation such as the merger of REC into PFC, framed under Sections 230 to 232 of the Companies Act, 2013, must ultimately be sanctioned by which one of the following?

  • A. The National Company Law Tribunal (NCLT)
  • B. The Securities and Exchange Board of India under the SCRA, 1956
  • C. The Reserve Bank of India under the Banking Regulation Act, 1949
  • D. The jurisdictional High Court under the Companies Act, 1956

Q5. Under the approved share-swap ratio of the PFC–REC merger, how many equity shares of PFC will an REC shareholder receive for every 100 equity shares held in REC?

  • A. 76
  • B. 82
  • C. 88
  • D. 94

Q6. As per the approved Scheme, what is the proposed appointed/effective date from which the merger of REC into PFC is to take effect?

  • A. 1 April 2026
  • B. 1 January 2027
  • C. 1 April 2027
  • D. 1 April 2028

Q7. With reference to the origins and evolution of PFC and REC, consider the following statements. Which of the above is/are NOT correct?

  1. REC was established in 1969 to finance rural electrification.
  2. PFC was incorporated in 1986 to finance the power sector.
  3. REC became a subsidiary of PFC in 2019.
  4. PFC is the only Maharatna CPSE under the Ministry of Power.
  • A. 4 only
  • B. 1 only
  • C. 3 and 4
  • D. 1 and 4

Q8. In the PFC–REC Scheme of Merger, the term 'transferor company' is best defined as which one of the following?

  • A. REC Limited, which merges into the other company and stands dissolved
  • B. PFC, the surviving company that absorbs the other entity's assets and liabilities
  • C. The Government of India, which transfers its shareholding to the merged entity
  • D. The holding company that retains majority voting control after the merger

Q9. The proposal to restructure PFC and REC 'to achieve scale and improve efficiency in the public-sector NBFCs' was announced in the Union Budget 2026-27 by which one of the following?

  • A. The Union Finance Minister
  • B. The Union Minister of Power
  • C. The Governor of the Reserve Bank of India
  • D. The Chief Executive Officer of NITI Aayog

Q10. With reference to the RBI's criteria for classifying a Non-Banking Financial Company as an Infrastructure Finance Company (NBFC-IFC), consider the following. Which of the above is/are correctly identified?

  1. It must deploy a minimum of 75% of its total assets in infrastructure loans.
  2. It must maintain a minimum Net Owned Fund of Rs 300 crore.
  3. It must maintain a CRAR of 15% with minimum Tier I capital of 10%.
  4. It must hold a minimum credit rating of 'BBB' or equivalent.
  • A. 1, 2 and 3
  • B. 1 and 4
  • C. 2, 3 and 4
  • D. 1, 2, 3 and 4

Q11. The 'Maharatna' status, which empowers a CPSE board to undertake mergers and acquisitions within prescribed ceilings, is conferred under the guidelines of which one of the following?

  • A. The Department of Public Enterprises
  • B. The Department of Investment and Public Asset Management (DIPAM)
  • C. NITI Aayog
  • D. The Ministry of Corporate Affairs

Q12. Reflecting its original rural electrification mandate, REC served as the designated nodal agency for which one of the following flagship programmes?

  • A. Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
  • B. Ujwal DISCOM Assurance Yojana (UDAY)
  • C. PM-KUSUM
  • D. Pradhan Mantri Sahaj Bijli Har Ghar Yojana subsidy disbursal to DISCOMs