Kerala Chief Minister Pinarayi Vijayan has received show-cause notices from the Enforcement Directorate (ED) regarding money laundering and violations related to the Kerala Infrastructure Investment Fund Board (KIIFB) masala bond transaction. The notice relates to Rs 468 crore worth of transactions and was issued on 12th November. The recipients are not required to present in person.
Show-cause notices have also been given to KIIFB, its Chief Executive Officer K M Abraham, Vice Chairman and former Finance Minister T M Thomas Isaac and Vijayan in his position as the head of the board. According to the ED, KIIFB raised Rs 2,672.80 crore through rupee-denominated masala bonds traded on the London and Singapore stock markets under the External Commercial Borrowing (ECB) method.
The money was meant for significant infrastructure projects as part of a larger scheme to raise Rs 50,000 crore for the state’s advancement. The ED stated that Rs 466.91 crore of the funds were utilised for land acquisition which it outlined is against Foreign Exchange Management Act (FEMA) norms and Reserve Bank of India (RBI) regulations. It has reported that there are accusations concerning the diversion of funds and irregularities associated with foreign exchange in connection with the bond proceeds.
Former Finance Minister Thomas Isaac was called by the agency earlier in January as part of their investigation into the same matter. On 27th June, a complaint was submitted under FEMA. The ED began looking into the masala bond issue in 2021 and summoned Isaac in 2024 and mentioned major rule violations. Notably, he had ignored two summons and disputed the ED’s move, in the Kerala High Court.
The opposition in the state expressed that the development is proof of their allegations that the Left Democratic Front (LDF) government’s funding arm violated established fiscal guidelines. Congress leader Ramesh Chennithala accused Vijayan and KIIFB leadership of widespread financial irregularities. He also charged that a corporation tied to the Lavalin case was engaged in the deal.
Congress MLA VD Satheesan also reaffirmed the opposition’s assertions about KIIFB’s borrowing patterns. He noted that various “mysteries” accompanied the bond issue, noting that KIIFB borrowed from the international market at a 9.732 percent interest rate.
