Sebi to issue AI rules for Indian markets with human oversight built in
India's securities regulator will soon issue detailed rules on how market participants may use artificial intelligence, with human oversight written into the framework. The Securities and Exchange Board of India's chairman, Tuhin Kanta Pandey, said the guidelines would balance innovation against investor protection, market integrity and financial stability.
Pandey, speaking at the inauguration of Sebi's pavilion at the 45th India International Trade Fair, said the rules would set safeguards for AI use by regulated entities. Expected provisions cover disclosures, accountability and a "human-in-the-loop" approach, so critical decisions taken with AI systems stay under human oversight. Sebi floated a consultation paper in June 2025 proposing principles for responsible use of AI and machine learning in the securities market.
Pandey also flagged cyberattacks on financial institutions and cryptocurrency platforms, and rising digital fraud involving social media influencers. Sebi introduced a structured incident response mechanism in May, aligned with the Financial Stability Board's FIRE reporting template, and is reviewing its regulatory framework to ensure AI adoption does not undermine investor protection or market safety.
On quantum computing, Pandey said Sebi is taking an inventory of cryptographic systems and identifying where cryptography is used to assess vulnerabilities. Markets globally are preparing for those risks, which he said are expected to become more pronounced during 2032-35, and preparations must be finished well in advance. Sebi has also built supervisory tools including its 'Sudarshan' platform, demonstrated at international regulatory forums.
Separately, Pandey said Sebi has set up a working group to examine how to make the Innovators Growth Platform more attractive for startups, particularly deep-technology and biotechnology companies that need longer to turn profitable. He acknowledged the platform has not gained the desired traction and said changes are being studied to give such businesses earlier access to public markets. He declined to disclose details of budget-related discussions.
What it means for Pakistan: Sebi's move gives Pakistan's own regulators a template as they build out rules for AI in finance. The Securities and Exchange Commission of Pakistan and the State Bank have been widening their technology and cyber oversight, and the human-in-the-loop principle Sebi is adopting speaks directly to the accountability questions Pakistani brokers, asset managers and fintechs will face as they adopt AI tools. Sebi's quantum-readiness audit is also a reminder that cryptographic systems underpinning digital payments and any future tokenised assets need reviewing before the 2032-35 window Pandey cited.
