Sebi chief Tuhin Kanta Pandey says AI guidelines for capital markets coming soon

Markets regulator Sebi will soon issue detailed guidelines for the responsible use of Artificial Intelligence (AI) in the capital markets, its chairman Tuhin Kanta Pandey said, emphasising the need to balance technological innovation with investor protection.

The Sebi chief said the proposed guidelines would focus on establishing appropriate guardrails for AI use, including disclosures, accountability of regulated entities and a 'human-in-the-loop' approach to ensure that critical decisions are subject to human oversight.

In June 2025, Sebi floated a consultation paper proposing guiding principles for responsible usage of Artificial Intelligence (AI)/ Machine Learning (ML) applications/models in securities markets.

These guiding principles are intended to optimise benefits and minimise potential risks associated with the integration of AI/ML based applications in securities markets to safeguard investor protection, market integrity, and financial stability.

Speaking at the inauguration of Sebi's pavilion at the 45th India International Trade Fair (IITF) 2026, organised by the India Trade Promotion Organisation (ITPO), on Saturday, Pandey said the regulator has been continuously strengthening its cybersecurity framework to address rising cyber threats.

He highlighted growing concerns over cyberattacks targeting financial institutions and cryptocurrency platforms, as well as digital frauds involving social media influencers.

Following emerging threats, the regulator also introduced a structured incident response mechanism in May this year, aligned with the Financial Stability Board's FIRE reporting template, he said at the sidelines of an event here on Saturday.

On quantum computing-related risks, the Chairman said Sebi is undertaking an inventory of cryptographic systems and identifying areas where cryptography is being used to assess potential vulnerabilities.

He said markets globally are preparing for the risks posed by quantum computing, with concerns expected to become more pronounced around 2032-35, and stressed the need to complete preparations well in advance.

On AI adoption, he said Sebi has also developed several supervisory tools, including its 'Sudarshan' tool, which is being demonstrated at international regulatory forums.

The regulator is also working on strengthening its AI capabilities through international initiatives and supervisory toolkits, he added.

The Chairman further said Sebi is reviewing the regulatory framework to ensure that the use of AI by market participants does not compromise investor protection, market safety or integrity.

On startups and the listing framework, the Sebi chief also said the regulator has formed a working group to examine ways to make the Innovators Growth Platform (IGP) more attractive for startups, particularly deep-tech and biotech companies that require long gestation periods before generating profits.

He said the existing platform has not gained the desired traction, and the regulator is reviewing potential changes to help such companies access public markets at an earlier stage.

The objective is to provide investors clarity about the higher risks associated with such businesses while allowing them to participate in their long-term growth potential.

However, he declined to share details of budget-related discussions.