Kochi: Leader of the Opposition V D Satheesan on Friday stepped up the allegation of corruption in an investment made by the state-owned Kerala Financial Corporation (KFC), saying ''those related to the ruling CPM'' were behind it.

Satheesan addressed the media in Kochi a day after Finance Minister K N Balagopal and his predecessor Thomas Isaac rubbished his Rs 101 crore corruption allegation.

Satheesan had on Thursday demanded an investigation into the KFC’s alleged involvement in causing losses to the tune of Rs 101 crore to the state exchequer by investing in the financially struggling Reliance Commercial Finance Ltd (RCFL).

The Congress leader alleged that KFC had "unlawfully and dubiously" invested Rs 60.8 crore in the Anil Ambani-promoted RCFL.

He claimed that KFC, established under the State Financial Corporations Act of 1951 to provide loans to small and medium enterprises (MSMEs), had diverted funds meant for state industries to RCFL on April 26, 2018.

Balagopal refuted the allegations, asserting that the 2018 investment was carried out in accordance with the law. Isaac, the finance minister, defended the investment decision when the investment was made, saying India's two most prominent credit agencies had given RCFL a double A plus rating.

Satheesan said on Friday that the decision to make the investment was made without even convening the KFC’s board meeting. He also countered Isaac’s claim on rating by citing the rating given by the financial risk assessment agency CARE ratings. The Congress leader said that even while giving an AA+ rating to RCFL, there was a warning calling for a ‘credit watch with developing implications’.

''The rating agency has made it clear that it has given the warning considering the track record of RCFL’s parent company Reliance Capital Ltd and sisterly concern Reliance Communications," he added.

He further added that the KFC took the decision to put the money in a sinking ship at a time when the Anil Ambani-led establishments were collapsing.

Asked how the investment caused corruption, Satheesan said the decision to avoid following due procedures was made to gain money in commission. Asked who made the gains, he said "those with party (CPM) relations." He stressed that he meant those related to party leaders.

According to Satheesan, the decision to invest was taken during KFC's Asset Liability Management Committee (ALCO) meeting on April 19, 2018. He said the investment was made at a time when Anil Ambani's companies were facing severe financial crises between 2015 and 2018.

He further alleged that KFC violated the law by investing in RCFL, as it is permitted to invest only in Reserve Bank of India (RBI)-approved or nationalised banks. Additionally, KFC did not disclose the private firm's name in its 2018-19 and 2019-20 annual reports; the name only appeared in the 2020-21 report after RCFL was liquidated in 2019.

According to Satheesan, the 2020-21 report stated that Rs 7.09 crore was recovered through the liquidation process. He said this was a fraction of the Rs 109 crore (including interest) initially invested, resulting in a Rs 101 crore loss to the state exchequer.

He alleged that the investment was made with prior knowledge of RCFL's impending liquidation and claimed that it was carried out with corrupt intent without the knowledge of KFC's board of directors.

Satheesan has demanded a thorough investigation into the deal and sought a reply from Chief Minister Pinarayi Vijayan. Responding to Satheesan, FM Balagopal said that KFC had invested in a company that also received investments from major banks such as Canara Bank, NABARD, and Union Bank.
(With inputs from PTI)