ED summons KIIFB officials to join probe into Masala bonds issue

The Enforcement Directorate (ED) has summoned two top officials of the Kerala Infrastructure Investment Fund Board (KIIFB) to appear before it in connection with its probe into the state-owned agency's external borrowings through "Masala Bonds", official sources said on Tuesday.

Kochi (Kerala): The Enforcement Directorate (ED) has summoned two top officials of the Kerala Infrastructure Investment Fund Board (KIIFB) to appear before it in connection with its probe into the state-owned agency's external borrowings through "Masala Bonds", official sources said on Tuesday.

They said notices have been issued to the KIIFB Chief Executive Officer (CEO) and deputy CEO directing them to join the probe next week. The ED is probing whether the KIIFB violated provisions of the Foreign Exchange Management Act (FEMA) in its external borrowings through "Masala Bonds".

The agency also took note of a CAG report on Kerala finances, tabled in the state assembly in January this year, is launching its investigation against the top officials of KIIFB. In its report, the CAG had severely criticised the KIIFB's external borrowings through "Masala Bonds", saying these were not in accordance with the Constitutional provisions and lacked legislative approval.

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The report had said the approval given by RBI to the KIIFB to issue the Masala Bonds is questionable because its permission allowed the government to route its own foreign borrowings through the state-owned institution.

"If this model were to be followed by other states as well, then the external liabilities of the country would increase substantially, without the central government even knowing that such liabilities are being created," it said.

Masala bonds are specialised debt instruments issued outside India but denominated in Indian Rupees, rather than the local currency. During her recent Kochi visit, Union Finance Minister Nirmala Sitharaman had questioned the role of the KIIFB in Kerala budget-making.

"I don't know what budget making is this when all the money is given to one KIIFB. What is this organisation? We also make a budget in the union government. We don't give all money to one particular agency and say, ''we'll see''," she had said on Sunday during the BJP's public meeting here.

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"The CAG has commented and criticised... Total questionable operation. If this is budget making, no wonder Kerala is going into a debt trap. And this is a questionable affair. Corruption," she had said. Kerala Finance Minister T M Thomas Isaac on Monday took exception to Sitharaman's comments on the KIIFB, saying what she said about the institution was "utter foolishness".

Isaac had said the union minister has "no understanding" of the issues mentioned and people expect a little bit "more standard" and "serious attitude" from a person occupying such a post.

PTI