Masala Bonds: Manoj Joshi anticipated risks and stepped away

THIRUVANANTHAPURAM: Manoj Joshi, who was Principal Secretary of the Finance Department at the time, left Kerala after anticipating the risks associated with the Kerala Infrastructure Investment Fund Board's (KIIFB) masala bond fundraising initiative. His decision now appears to have been vindicated.

KIIFB became the first institution in the country to raise Rs 2,150 crore through masala bonds. According to an expert committee report, the transaction resulted in a loss of Rs 187 crore to the state in interest payments alone. The Enforcement Directorate (ED) also found violations of foreign exchange regulations in the transaction.

Joshi, a capable officer, opted for central deputation because he was disillusioned with the government's questionable actions in pursuing the KIIFB initiative and foresaw the legal complications that could arise. He even gave up the opportunity to become the state's Chief Secretary.

Joshi had opposed raising funds from abroad through masala bonds because of the high interest burden. Tom Jose, who was Chief Secretary at the time, shared his view. At a KIIFB board meeting attended by the Chief Minister on January 17, 2019, Tom Jose openly raised the issue.

If the Finance Secretary's objections were to be overruled, a Cabinet decision was required. However, no such decision was taken in the case of the masala bonds. The Chief Minister and a retired IAS officer appointed as KIIFB's chief executive officer overruled the Finance Department Secretary's decision. The funds were raised through masala bonds at an interest rate of 10.72%.

Joshi questioned why KIIFB had opted for masala bonds at such a high interest rate when US dollar bonds and loans from foreign financial institutions were available at less than half that rate. R.K. Singh, who later became Principal Secretary of the Finance Department, also went on central deputation to Delhi soon afterwards.