In a major development, the Enforcement Directorate (ED) has issued show cause notices to Kerala Chief Minister Pinarayi Vijayan and top officials of the Kerala Infrastructure Investment Fund Board (KIIFB). The action is linked to alleged violations of the Foreign Exchange Management Act (FEMA) concerning the board's overseas borrowing activities.
Details of the ED Notice and Alleged Violations
The federal probe agency dispatched the notices on November 12, 2025, initiating adjudication proceedings in the case. Officials clarified that the notice recipients, which include the Chief Minister in his capacity as KIIFB Chairman, are not required to appear in person at this stage.
Besides CM Vijayan, the notices were served to KIIFB CEO KM Abraham, its Vice Chairman T M Thomas Isaac, and the board itself as an entity. The case revolves around KIIFB's method of raising funds through External Commercial Borrowings (ECB), specifically via rupee-denominated Masala Bonds listed on the London and Singapore Stock Exchanges.
The Core Allegation: Misuse of Bond Proceeds
Investigations focus on the alleged diversion of funds raised through these bonds. Records indicate that KIIFB mobilized ₹2,672.80 crore from international markets to finance infrastructure projects within the state.
However, the ED's scrutiny centers on a specific transaction. It is alleged that a portion of this foreign borrowing, amounting to ₹466.91 crore, was used to purchase land. This usage reportedly flouts guidelines issued by the Reserve Bank of India (RBI).
The agency cites RBI's Master Direction No. 5/2015-16 and Circular No. 17 dated September 29, 2015, which prohibit the use of ECB funds for land acquisition. A subsequent RBI communication on June 1, 2018, reiterated this restriction, which the ED alleges was violated.
Case Timeline and Escalating Scrutiny
The formal journey of this case began with a complaint filed under FEMA provisions on June 27, 2025. Following an examination of the complaint and related evidence, the adjudicating authority authorized the issuance of the show cause notices.
This move marks a significant escalation in the ongoing inquiry into KIIFB's financial operations and its borrowing practices from international markets. The issuance of notices to the state's highest elected official and senior bureaucrats brings the probe into sharp political focus. Further developments in the case are awaited as the notice recipients prepare their responses.
