The Securities and Exchange Board of India (Sebi) is considering a proposal to tighten rules for liquid mutual funds holding assets worth ?8 lakh crore or more to curb volatility in flows following the challenges facing finance companies in the wake of the debt default by Infrastructure Leasing & Financial Services (IL&FS). The capital market regulator is planning a short lock-in period for investments in liquid funds, in which investors — mostly large companies — park idle cash. Sebi may also make it mandatory for liquid funds to mark to market the value of more bonds and allow segregation of debt instruments in mutual fund portfolios that are in trouble, said three people aware of the development. These measures are likely to be discussed at the Sebi-appointed mutual fund advisory committee meeting on Monday. A lock-in period, aimed at reducing volatility in flows, could reduce the popularity of the product among institutional investors, experts said. Most banks churn