Sebi to issue AI guidelines for capital markets soon, focus on investor protection and human oversight
What happened
The Securities and Exchange Board of India (SEBI) announced it will soon release detailed guidelines for the use of artificial intelligence in the country's capital markets. The new framework will address investor protection, human oversight, and cybersecurity in response to increasing digital threats. SEBI's chairman, Tuhin Kanta Pandey, outlined these plans during the India International Trade Fair 2026. The regulator has also been strengthening its cybersecurity measures and developing AI-based supervisory tools.
Key details
- SEBI floated a consultation paper on AI/ML principles in June 2025.
- The guidelines will require disclosures and a 'human-in-the-loop' approach for AI decision-making.
- A structured incident response mechanism for cyber threats was introduced in May 2026.
- SEBI is assessing risks from quantum computing by reviewing cryptographic systems.
- The 'Sudarshan' AI supervisory platform is being demonstrated at international forums.
Why it matters
Market participants in India's capital markets will need to comply with new rules on AI use, including mandatory human oversight and disclosure requirements. These changes introduce additional compliance steps and are intended to reduce risks to investors and the financial system. Financial institutions and startups will also face updated cybersecurity protocols and may need to review their technology infrastructure to address new threats, including those from quantum computing.