ED Issues FEMA Notices to Kerala CM, Ex-Finance Minister Over KIIFB Masala Bonds
Enforcement Directorate tightens noose on Pinarayi Vijayan over KIIFB masala bond violations.
The Enforcement Directorate on Monday served show-cause notices under the Foreign Exchange Management Act (FEMA) to Kerala Chief Minister Pinarayi Vijayan, former Finance Minister Dr Thomas Isaac, and KIIFB CEO KM Abraham for alleged serious irregularities in the issuance and utilisation of ₹2,150 crore raised through masala bonds in 2019 by the Kerala Infrastructure Investment Fund Board (KIIFB). The central agency has accused the trio of illegally routing offshore funds meant for External Commercial Borrowings towards revenue expenditure and land acquisition — activities explicitly prohibited under RBI guidelines.
Pinarayi Vijayan, who holds the position of ex-officio chairperson of KIIFB, a state-owned body corporate created to mobilise off-budget resources for major infrastructure projects, now faces direct scrutiny for the first time in this long-running probe. Dr Thomas Isaac, the then finance minister who piloted the bond issue in the assembly and defended it as a path-breaking financial innovation, and KM Abraham, the current Chief Principal Secretary in the Chief Minister’s Office, have also been named for their respective roles in approval and execution.
Responding sharply, Dr Isaac termed the notices a “cheap political stunt” timed deliberately ahead of local body elections to malign the Left Democratic Front government. He maintained that every penny was utilised in strict compliance with RBI regulations prevailing in 2019 and that land purchases for KIIFB projects were completed before the central bank imposed fresh restrictions. “This is nothing but a scripted conspiracy by the BJP to divert attention from its failures. The people of Kerala will teach them a lesson,” he declared.
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The case has already witnessed multiple legal battles. In 2024, the Kerala High Court granted interim protection to Isaac against coercive interrogation after he moved court against repeated ED summons. Undeterred, the agency proceeded to file its detailed complaint before the FEMA adjudicating authority, leading to Monday’s formal notices that require the three leaders to file detailed replies justifying the transactions.
As Kerala braces for fiercely contested panchayat and corporation elections, the ED action has electrified the state’s political atmosphere, with the ruling LDF crying vendetta and the opposition Congress and BJP insisting that no one, not even a sitting chief minister, is above the law when it involves offshore funds and financial propriety.
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