NEW YORK (Reuters) - Citigroup Inc is considering a sale of its index business, two sources familiar with the situation said on Wednesday, making it the latest bank to think about jettisoning benchmarking amid increased regulatory scrutiny.

The value the Citi Fixed Income Indices business could not be learned. About US$174 billion in exchange traded fund and mutual fund assets track Citigroup indexes, according to Morningstar. There are even more institutional assets that track these indexes, although the firm does not disclose that number. Offerings include the World Government Bond Index, which the Citi website calls its flagship.

A Citigroup spokesman declined to comment.

Large banks are increasingly looking to exit index benchmarking as regulators increase their scrutiny, looking at issues such as transparency and potential conflicts of interest, said Deborah Fuhr, managing partner at ETFGI, a London-based research firm.

Barclays Plc, for example, is selling its benchmark business, best known for the U.S. Aggregate Bond Index, although that auction is struggling.

At the same time, there is growing demand from firms that already own indexes to expand their offerings through acquisitions because more money is flowing into index-based funds and exchange-traded funds.

Investors have poured US$401.3 billion into index funds and ETFs since January 2008, according to Lipper, a division of Thomson Reuters.

"Firms that are already in the indexing space want to have economies of scale so they can reduce their costs," Fuhr said.

Exchange operator Nasdaq OMX Group Inc and index provider S&P Dow Jones Indices told Reuters earlier this year they were interested in acquisitions to grow their index businesses.