The Enforcement Directorate issued a show-cause notice under the Foreign Exchange Management Act (FEMA) to Kerala Chief Minister Pinarayi Vijayan, his personal secretary, and former finance minister Thomas Issac over alleged foreign exchange violations linked to the state’s 2019 masala bond issuance.
The notice pertains to transactions amounting to Rs 468 crore.
Masala bonds are rupee-denominated bonds issued overseas by Indian entities, instead of in local currency or US dollars.
Kerala was the first state in India to float such bonds in 2019. In that year, KIIFB raised approximately Rs 2,000 crore, later quantified at Rs 2,150 crore, through its debut masala bond issue on the London Stock Exchange.
The funds were intended for major infrastructure projects as part of a broader plan to mobilise Rs 50,000 crore for the state’s development.
According to the Enforcement Directorate, there are allegations of diversion of funds and forex-related irregularities in connection with the bond proceeds.
Earlier in January, the ED had summoned former finance minister Thomas Issac in the same case as part of its probe into the end-use of the masala bond proceeds and the compliance of the issuance with FEMA norms.
Reacting to the notice, former finance minister Thomas Issac alleged that the agency’s actions were politically timed. “They are back with their regular antics.
They are digging up the case related to masala bonds again,” he said, claiming that notices had surfaced ahead of the 2020 local body elections, the 2021 Assembly elections and the last Lok Sabha election. “It’s yet another election time in Kerala and an ED notice has come. This is part of ED’s election campaign for the BJP and the UDF,” he stated.
Issac said the RBI had approved KIIFB’s masala bond issuance and rejected the allegation that the board did not have the right to raise funds this way.
He added that despite providing clarifications, he continued to receive notices seeking personal and family financial details. “I don’t have the documents relating to KIIFB. They wanted details of my bank account, my family members’ bank accounts, and the annual reports of companies where I served as a director. What is all this for?” he asked.
