Why ED has issued show cause notice to Kerala CM
What's the story
The Enforcement Directorate (ED) has issued a ₹466 crore 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. The notice is related to alleged foreign exchange violations in the 2019 masala bond issuance by the Kerala Infrastructure Investment Fund Board (KIIFB). The transactions in question amount to ₹468 crore.
Bond details
Kerala's pioneering masala bond issue under scrutiny
Kerala was the first Indian state to issue masala bonds in 2019, raising around ₹2,000 crore on the London Stock Exchange. The funds were meant for major infrastructure projects as part of a larger plan to raise ₹50,000 crore for state development. However, there are allegations of fund diversion and forex-related irregularities linked to these bond proceeds.
Political allegations
Former finance minister accuses ED of political bias
Responding, Former finance minister Issac has alleged that the ED's actions are politically timed, claiming similar notices had surfaced before past elections. He said, "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." The ED had summoned Issac in the same case in January.
Borrowing concerns
Opposition leader questions borrowing patterns, interest rates
Opposition Leader VD Satheesan has also raised concerns over KIIFB's borrowing patterns. He noted that KIIFB borrowed from international markets at an interest rate of 9.732%, which he deemed unnecessarily high. "There was no need to borrow at such a high interest rate," he said, adding, "For ₹2,150 crore, ₹1,045 crore is interest. A total of ₹3,195 crore must be repaid. About half of the amount has gone as interest in five years."