SEBI to introduce AI and machine learning guidelines for capital markets

The Securities and Exchange Board of India (SEBI) is preparing to issue new guidelines for the responsible use of artificial intelligence (AI) and machine learning (ML) within the country's capital markets. Speaking at the 23rd FICCI Capital Markets Conference, SEBI Chairman Tuhin Kanta Pandey announced that the upcoming framework will mandate human oversight, data controls, and 'kill-switch' mechanisms to mitigate risks such as opacity, bias, and cybersecurity threats.

Pandey emphasized that SEBI-regulated entities will remain fully responsible for any AI or ML tools they employ, regardless of whether those tools are developed in-house or sourced from third parties. The regulator is also exploring the introduction of an IT resilience index for market infrastructure institutions to objectively assess the stability of critical systems.

The move comes amid significant expansion in India's financial markets. Equity issuances reached approximately Rs 4.5 lakh crore in FY25-26, and corporate bond issuances exceeded Rs 9 lakh crore in FY26. Pandey noted that while AI can enhance market surveillance, fraud detection, and investor servicing, the regulatory focus must remain on preserving market trust and integrity.