Sebi Chairman Tuhin Kanta Pandey stated that the market regulator will soon publish detailed rules regarding the responsible application of artificial intelligence (AI) in capital markets. He emphasized the need to strike a balance between technological innovation and protecting investor interests.
According to the head of Sebi, the proposed directives will focus on establishing appropriate safeguards for the use of AI. These measures include disclosure requirements, defining accountability for regulated entities, and implementing a human-in-the-loop approach to decision-making processes to ensure human oversight over critical decisions.
In June 2025, Sebi (Securities and Exchange Board of India) released a draft consultative document outlining the fundamental principles for the responsible use of machine learning (ML) and artificial intelligence (AI) applications and models in securities markets.
These guidelines aim to optimize the benefits and minimize potential risks associated with integrating AI/ML-based applications into securities markets, thereby ensuring investor protection, market integrity, and financial stability.
Speaking at the opening of the Sebi pavilion at the 45th India International Trade Fair 2026, organized by the India Promotion Council for Trade, Pandey noted that the regulator is continuously strengthening its cybersecurity system to counter growing cyber threats.
He highlighted increasing concerns regarding cyberattacks targeting financial institutions and cryptocurrency platforms, as well as social media influencer-related digital fraud.
In response to these threats, the regulator introduced a structured incident response mechanism in May of this year, which aligns with the reporting template of the Financial Stability Board (FSB).
Regarding quantum computing risks, the Chairman reported that Sebi is inventorying cryptographic systems and identifying areas where cryptography is used to assess potential vulnerabilities. He stressed that global markets are preparing for the risks posed by quantum computing and expects concerns to become more pronounced around 2032–2035, insisting on the necessity of completing preparations in advance.
Concerning AI adoption, Pandey added that Sebi has developed several supervisory tools, including the 'Sudarshan' tool, which is being demonstrated at international regulatory forums. The regulator is also working to enhance its AI capabilities through international initiatives and sets of supervisory tools.
Furthermore, the Chairman stated that Sebi is reviewing its regulatory framework to ensure that the use of AI by market participants does not jeopardize investor protection, market safety, or integrity.
On matters concerning startups and the listing system, the Sebi chief also announced that the regulator has formed a working group to study ways to enhance the attractiveness of the Innovators Growth Platform (IGP) for startups, especially those in deep technology and biotechnology sectors that require a long period before achieving profitability.
He noted that the existing platform has not reached the desired level of engagement, and the regulator is considering possible changes to help such companies reach public markets earlier. The goal is to provide investors clarity regarding the higher risks associated with such ventures while simultaneously enabling participation in their long-term growth potential. However, he declined to share details regarding budget discussions.
