Kerala CM Pinarayi Vijayan Receives ED Notice in KIIFB Masala Bond Case, Citing FEMA Violations
Thiruvananthapuram, December 1, 2025 – In a significant development, the Enforcement Directorate (ED) has served a show-cause notice to Kerala Chief Minister Pinarayi Vijayan concerning alleged irregularities in the Kerala Infrastructure Investment Fund Board (KIIFB) Masala Bond transaction. The federal investigative agency has initiated this action primarily citing suspected violations of the Foreign Exchange Management Act (FEMA) regulations. The notice, which underscores a serious inquiry into the state’s financial dealings, was also extended to former state Finance Minister Dr. Thomas Isaac and several key KIIFB officials.
The Chief Minister received the notice in his capacity as the Chairman of KIIFB, an entity crucial for funding large-scale infrastructure projects across Kerala. The notice was formally issued by the Adjudicating Authority within the ED, marking a progression in an investigation that has been ongoing for several years.
Sources indicate that the notice was dispatched to Chief Minister Vijayan on Saturday. He is now mandated to provide a detailed written response to the ED. The outcome of these proceedings will largely hinge on the satisfactoriness of his reply. Should the ED find the explanation adequate, the ongoing procedural actions against him may be halted. Conversely, an unsatisfactory response could lead to further, more stringent legal proceedings. At the heart of the ED’s findings is the contention that the funds, amounting to over two thousand crores, raised through the Masala Bonds were utilized for fundamental infrastructure development projects in a manner that constitutes a direct violation of established foreign exchange regulations.
The KIIFB Masala Bonds were originally floated in 2019, securing more than two thousand crores from international markets via the London Stock Exchange. These bonds carried an interest rate of 9.72 percent. The crucial decision to finalize the necessary procedures for the issuance of these bonds was made during a high-level meeting held in January 2019, presided over by Chief Minister Pinarayi Vijayan himself. This meeting is now under intense scrutiny as part of the broader investigation.
This current action by the ED follows previous probes and notices issued to former Finance Minister Dr. Thomas Isaac. Dr. Isaac, who played a pivotal role in KIIFB’s financial strategies, had received notices on two separate occasions approximately two years ago. In response to these notices, he had sought legal recourse, challenging the ED’s jurisdiction and findings before the Kerala High Court.
During the court proceedings, the Enforcement Directorate clarified that its investigation was instigated based on observations and reports from the Comptroller and Auditor General (CAG) of India. However, Dr. Isaac maintained that the Masala Bonds were acquired and managed in strict adherence to all prevailing financial regulations. He further highlighted in his petition that the Reserve Bank of India, the country’s central banking institution, had not raised any objections or suspicions regarding the bond issuance. The issuance of this latest notice to the Chief Minister comes after an extensive and meticulous investigation spanning three years, signifying the agency’s resolve to pursue the matter to its conclusion. The implications of this development are significant for the state government, potentially impacting its financial autonomy and political standing.