MUMBAI, April 24 -- The Securities and Exchange Board of India (Sebi) has proposed an overhaul of how stock brokers' variable net worth is calculated, tightening capital requirements to better reflect risk exposure.

In a consultation paper issued Friday, the regulator said the revised framework would link brokers' capital buffers more directly to the number of active clients they service and the average credit balances they handle.

The change is intended to make the measure a more accurate indicator of a broker's scale and risk profile, and to ensure a "large financial cushion to absorb losses or other unforeseen circumstances," said the draft paper. Variable net worth represents additional capital brokers must maintain to cover operati...