Thomas Isaac insisted on KIIFB masala bonds despite misgivings by officials: ED

Thiruvananthapuram: Minutes of the Kerala Infrastructure Investment Fund Board (KIIFB) meeting, where it was decided to issue masala bond, was tabled by the government in the Legislative Assembly three years ago. These minutes are now being used by the Enforcement Directorate (ED) as the main weapon against former minister Thomas Isaac.

The minutes revealed that the then Chief Secretary Tom Jose and Finance Secretary Manoj Joshi had opposed the KIIFB's move to issue masala bonds to raise funds at a higher interest rate.

The Masala bond had come up for discussion as agenda number 14 of the 34th general body of KIIFB, chaired by Chief Minister Pinarayi Vijayan on October 2, 2018. KIIFB CEO KM Abraham also sought permission from the board to raise funds by issuing masala bonds on the London Stock Exchange.

Subsequently, Joshi questioned the move. "Why should the state raise funds at a higher interest rate when it could issue bonds at a lesser interest within the country," he asked.

After Joshi, Jose intervened in the issue, asking why the interest rates of masala bonds were high when rates were generally lower in the foreign markets. He further recommended checking the exchange rates to find if lower rates were available.

However, board members including Prof Sushil Khanna, JN Guptam Salim Gangadharan, and RK Nair supported the issuance of Masala bonds and suggested that KIIFB go ahead with its plan.

Concluding the discussion on the matter, Isaac advised to consider the decision as an opportunity for the state to enter the international market. "It should be utilised and would be beneficial in the long term," he added. CM Vijayan, however, remained silent.

Later, KIIFB issued Masala bonds on the London Stock Exchange at an interest of 9.72 per cent and raised Rs 2,150 crore in 2021. It has been learned that the ED has found the minutes of the meeting to hold Issac responsible for the Masala bond issue, which allegedly violated the Foreign Exchange Management Act.

Issac explains
Responding to the ED summons, Issac said that the central agency had asked him to provide oral statements regarding the issuance of Masala bonds, and the expenditure of the funds thus raised. According to Issac, ED asked him for an explanation as the vice chairman and executive committee chairman of the board.

"I held both responsibilities (of vice chairman and executive committee chairman) as the Finance Minister, and these posts have no special powers. The board makes the decisions collectively, and hence I replied to the ED that I had no personal role in issuing Masala bonds," he said.