‘Ridiculous, mere election stunt’: Kerala CM hits back at ED notice over KIIFB masala bonds

Kochi: Chief Minister Pinarayi Vijayan on Friday dismissed the Enforcement Directorate’s show-cause notices to him, the Kerala Infrastructure Investment Fund Board (KIIFB) and others over Masala Bond issuance as “ridiculous” and nothing more than an election-time gimmick. He said that all KIIFB-funded infrastructure projects adhered strictly to Reserve Bank of India (RBI) norms. 

“Such actions ahead of elections are quite natural. What all comes next is yet to be seen. But this ED notice is ridiculous,” Vijayan said at a ‘Meet the Press’ event organised by the Ernakulam Press Club. 

Defending KIIFB, he said the agency was created as an alternative funding mechanism for large-scale infrastructure development in the state, and it had delivered far beyond its original mandate. 

“When KIIFB was formed in 2016, we announced a plan to create assets worth ₹50,000 cr in five years. KIIFB completed projects worth ₹62,000 cr then, and today that figure has touched ₹90,000 cr,” he said.

“The allegations are over implementing infrastructure development in the state. If they want to blame us for that, we will raise both hands and say; Yes, we did it. Every activity of KIIFB was carried out in accordance with RBI norms. KIIFB has never violated any norms,” Vijayan said. 

Show-cause notices, which do not mandate personal appearance, have been issued by ED to KIIFB, its CEO KM Abraham, Vice Chairperson and former Finance Minister TM Thomas Isaac, and Chief Minister Pinarayi Vijayan in his capacity as board chair. The notices were served a few days ago.

According to the Enforcement Directorate, KIIFB raised ₹2,672.80 cr through rupee-denominated masala bonds listed on the London and Singapore stock exchanges under the External Commercial Borrowing (ECB) route. The agency alleges that ₹466.91 cr from these funds was diverted for land acquisition, which it claims is barred under RBI rules and violates FEMA provisions, including Master Direction No. 5/2015-16 and subsequent circulars.

The FEMA complaint was filed on June 27, 2025, after which the adjudicating authority took cognisance and issued the notices.

Reacting to the development, Isaac had earlier rejected the accusations outright. “This is nonsense. We never used the fund for land purchases. Acquisition for KIIFB projects followed all norms. This notice is an election stunt,” he said.

The Congress, meanwhile, accused the Chief Minister and KIIFB leadership of major financial irregularities and alleged that a company linked to the Lavalin case was involved in the transactions.

The ED’s probe into the masala bonds began in 2021. Isaac was summoned in 2024 over alleged rule violations, but he skipped two summons and challenged the agency’s actions in the Kerala High Court.