Mumbai, The Securities and Exchange Board of India (SEBI)on Friday proposed a revised framework for calculating the net worth requirement of stock brokers, seeking to align capital norms more closely with the scale and risk profile of their operations.
In a consultation paper, the regulator said the existing methodology — which ties net worth to 10 per cent of the average daily client cash balances retained by brokers — has lost relevance following the implementation of the upstreaming framework.
Under this system, most client funds are now transferred to clearing corporations, leaving minimal balances with brokers.
To address this shift, SEBI has suggested a new approach that considers both the volume of client funds handled and the number of active clients serviced by a broker.
The regulator emphasised that net worth serves as a “second line of defence” after margins and should be strong enough to absorb risks that are not covered through margin requirements.
Under the proposed structure, the variable net worth component would be calculated using a combination of parameters.
These include 10 per cent of the average credit balance of all clients over the preceding six months, along with additional capital requirements linked to the number of active direct clients.
Brokers with more than 10,000 and up to 50,000 clients would need to maintain around Rs 50 lakh, with an incremental Rs 50 lakh required for every additional 50,000 clients or part thereof.
The framework also introduces graded requirements for clients onboarded through authorised persons.
This includes Rs 5 lakh for up to 2,500 clients, Rs 25 lakh for between 2,500 and 10,000 clients, and Rs 50 lakh for every additional 10,000 clients or part thereof across exchanges.
Market participants said the revised norms are aimed at ensuring that brokers with larger client bases maintain proportionately higher financial buffers, thereby strengthening risk management across the system.
The proposal follows recommendations from a working group that included exchanges such as the National Stock Exchange of India and the BSE, along with broker associations.
SEBI has invited public comments on the draft proposal until May 15, 2026, before finalising the new framework.
