The Securities and Exchange Board of India (SEBI) is set to issue comprehensive guidelines for the responsible use of Artificial Intelligence (AI) in the capital markets. Chairman Tuhin Kanta Pandey announced the move, noting that the regulator intends to balance technological innovation with the necessity of investor protection.
The proposed framework will focus on establishing clear guardrails for the deployment of AI and machine learning models within securities markets. According to the regulator, key components of these guidelines will include mandatory disclosures, the accountability of regulated entities, and a 'human-in-the-loop' requirement. This approach is designed to ensure that all critical decisions made using AI are subject to direct human oversight, thereby safeguarding market integrity and financial stability.
SEBI previously released a consultation paper in June 2025 regarding these guiding principles. Speaking at the inauguration of the SEBI pavilion at the 45th India International Trade Fair on Saturday, November 14, 2026, Mr. Pandey highlighted that the regulator is also bolstering its cybersecurity framework to counter emerging threats against financial institutions, cryptocurrency platforms, and digital fraud involving social media influencers.
Regarding the future of technology, the Chairman noted that SEBI is currently conducting an inventory of cryptographic systems to identify potential vulnerabilities associated with quantum computing. He suggested that global markets should prepare for these specific risks well in advance, as concerns are expected to peak between 2032 and 2035.
In addition to these measures, the regulator is reviewing its listing framework. Mr. Pandey stated that a working group has been formed to make the Innovators Growth Platform more attractive for deep-tech and biotech companies, which often require long gestation periods before reaching profitability.
Key facts
- SEBI is introducing mandatory AI usage guidelines to ensure accountability and human-in-the-loop oversight in capital markets.
- The regulator implemented a structured incident response mechanism in May 2026, aligned with the Financial Stability Board's FIRE reporting template.
- SEBI has developed a supervisory tool called 'Sudarshan' to strengthen its own AI capabilities and monitoring.
- Quantum computing risks are expected to become more pronounced in the global market between 2032 and 2035.
- A working group is evaluating changes to the Innovators Growth Platform to better support startups in the deep-tech and biotech sectors.
Why it matters
These initiatives aim to protect retail and institutional investors from risks associated with automated trading and digital fraud. By standardizing AI usage, SEBI seeks to maintain market integrity while simultaneously creating a more accessible path for high-growth, innovative startups to enter the public market.
Background
In June 2025, the regulator released a consultation paper that outlined the initial guiding principles for using AI and machine learning applications in the securities sector.
Source: Economic Times, The Hindu
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