After CNBC-TV18 reported few days ago, that fund managers are manipulating net asset values or NAVs of floating-rate schemes, market regulator Sebi and industry body AMFI (Association of Mutual Funds in India) are working together on standardising valuations of the underlying assets of these funds - the floating rate bonds.

CNBC-TV18 has learnt that the Sebi in talks with rating agencies to set up a common valuation method of floating rate bonds. The regulator will form standardised valuation process in the next two -three months.

The AMFI is setting up a committee to work out a common valuation procedure. The AMFI will submit this to Sebi in the next few days. AMFI will suggest the bond-valuer method, it is learnt. CNBC-TV18 also learnt that all fund houses would follow a common value of a floating rate bond.

Earlier, fund managers used their own methods to value these bonds.

The floating rate funds invest in illiquid G-Secs. The coupon rate or bond value is updated generally every six months. During the tenure of the bond, many fund houses used the circular trading route to rig NAVs to push up returns. In 2008, the Floating Rate Fund Corpus is at Rs 4,000 crore, while in 2005, it stood at Rs 20,000 crore.

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