FBIL

A Category III AIF cannot value its debt and money market holdings by guesswork — SEBI requires it to mark them to market using independently published prices, and FBIL is one of the bodies that publishes those prices.

Financial Benchmarks India Pvt. Ltd. (FBIL), alongside the Clearing Corporation of India Ltd. (CCIL) and the Fixed Income Money Market and Derivatives Association of India (FIMMDA), publishes the reference prices used to value money market instruments and long-term fixed income securities such as Government Securities and corporate bonds held by Category III AIFs.

Money market instruments held by a Category III AIF are valued using the Mark-to-Market process, with the average of security-level prices disclosed by FBIL, CCIL, FIMMDA and similar valuation agencies. The price of all Government Securities, across different maturities, is separately published by FBIL, CCIL and FIMMDA.

For T-bills and G-Secs specifically, valuation uses the Volume Weighted Average Yield (VWAY) for trades in the last one hour of trading. For all other money market and debt securities — including a Government Security not traded in that final hour — valuation instead uses the VWAY of all trades during the day.

The workbook is explicit about why this matters: using the mark-to-market approach, anchored on FBIL/CCIL/FIMMDA prices, reduces the potential default risk that stays hidden in a fixed income security under an amortised cost approach — mark-to-market is described as more reliable and transparent, even though it reduces the manager's discretion in valuing debt instruments.

Meridian Debt Opportunities Fund, a Category III AIF, holds Rs 40 crore of a 5-year Government Security and Rs 15 crore of 91-day T-bills as part of its liquid book.

On the valuation day, the T-bills traded actively in the last hour before close, so their value is computed using the VWAY over that last one hour of trading, as published with reference to FBIL's benchmark. The 5-year G-Sec did not trade at all in the final hour, so its VWAY is instead computed over all trades during the day.

The fund's valuation agency cross-checks both figures against the price feeds disclosed by FBIL, CCIL and FIMMDA before finalising the day's Net Asset Value — a Category III AIF cannot substitute its own internal estimate for these published benchmarks.

Chapter 8 (Valuation), in the discussion of money market and debt instrument valuation, names FBIL alongside CCIL and FIMMDA as the sources of security-level prices, and sets out the VWAY-based valuation methodology in detail. Expect FBIL tested as one of a named group of valuation agencies, and the last-one-hour versus whole-day VWAY distinction tested as a discriminator between how T-bills/G-Secs and other debt securities are valued.

• FBIL is one of three named valuation-price sources — FBIL, CCIL and FIMMDA — not the only one. A question naming just one of the three as "the" source of debt security prices is incomplete.
• T-bills and G-Secs use VWAY from the last one hour of trading; other money market and debt securities use VWAY across the whole day. This is the specific distinction the workbook draws, and it is easy to invert.
• Mark-to-market, not amortised cost, is the preferred approach precisely because amortised cost can mask a credit-rating downgrade's effect on value — the workbook frames this as a transparency trade-off against manager discretion.