KIIFB 'masala bond': ED has authority to investigate, RBI tells High Court

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Kochi: The Reserve Bank of India (RBI) informed the Kerala High Court that the Enforcement Directorate (ED) has the authority to investigate the case of raising foreign money through KIIFB ‘masala bond’.

The RBI has clarified that the ED has the authority to probe the ‘masala bond’ issue under the Foreign Exchange Management Act (FEMA). The ED had investigated if there was any violation of FEMA in raising foreign money through the ‘masala bond’. The RBI gave the affidavit in the petition filed by former finance minister Thomas Isaac and KIIFB questioning this.

For issuing the ‘masala bond’ KIIFB had applied through Axis Bank. Based on this the RBI issued a no-objection certificate on 1 June, 2018. It also clarified that the NOC was issued based on the FEMA and not by the government or any other authority. A Loan Registration Number (LRN) was given to issue the ‘masala bond’ based on this.

It also clarified that providing the LRN was not a reason for non-compliance with the rules. The utilisation of the money raised through the ‘masala bond’ has to be submitted monthly in the prescribed form.

This has to be submitted along with a certificate from the bank, through which the money was raised. The information about the repayment of the money should also be included. According to the RBI affidavit, KIIFB has submitted this certificate.

The affidavit was submitted by the assistant general manager of RBI Kochi regional office based on the high court order on 20 December, 2022. The high court sought the stance by making RBI a party in the case.

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