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NEW DELHI: Amid escalating cyber threats targeting stock markets and financial institutions, the Securities and Exchange Board of India (SEBI) has assured that it is continuously evolving and strengthening its digital security architecture. SEBI Chairman Tuhin Kanta Pandey stated on Saturday that security systems are undergoing regular checks, including vulnerability assessments, patch testing, and swift remediation of security flaws. Speaking after inaugurating the SEBI pavilion at the 45th India International Trade Fair in New Delhi, Pandey also announced that the regulator will soon issue comprehensive guidelines governing the responsible use of Artificial Intelligence (AI) and Machine Learning (ML) in financial markets.
Accountability and Human Oversight in AI Usage
Pandey noted that the nature of cyber threats in the financial sector is changing rapidly, prompting the regulator to constantly adapt its defenses against attacks targeting financial entities and cryptocurrency platforms. Under the upcoming AI and ML framework, SEBI will prioritize transparency, accountability, and human oversight to ensure automated systems do not compromise investor interests, market safety, or fairness. Regulated entities may be required to make necessary disclosures regarding their AI applications and associated risks.
The proposed framework will mandate a human-in-the-loop principle for critical decisions, ensuring that sensitive financial judgments are not left entirely to automated systems where market stability or investor welfare could be affected. This regulatory push builds upon a consultation paper issued by SEBI in June 2025, which outlined principles for leveraging technological benefits while mitigating risks to maintain market credibility and financial stability.
Incident Reporting and Quantum Computing Preparedness
To streamline responses to emerging cyber threats, SEBI implemented a structured incident-response mechanism in May 2026 aligned with the Financial Stability Board’s (FSB) FIRE reporting format. This system standardizes the identification, reporting, and redressal of cybersecurity incidents. Beyond traditional institutions, the regulator is actively monitoring vulnerabilities across cryptocurrency platforms like Binance, as well as digital frauds perpetrated through social media influencers.
Looking ahead, SEBI is assessing future cybersecurity risks posed by quantum computing, which global financial markets anticipate could become severe between 2032 and 2035. Pandey revealed that the regulator is compiling an inventory of its cryptographic systems to identify where encryption technologies are deployed and evaluate their vulnerability to future computing capabilities. Simultaneously, SEBI has developed indigenous AI-based surveillance tools, including a system named Sudarshan, which is being showcased at international regulatory forums following recent discussions on AI, cybersecurity, and quantum technology at the International Organization of Securities Commissions (IOSCO) board meeting.
Reforming Listing Norms for Deep-Tech Startups
Alongside technological safeguards, SEBI is working to make stock market listings more attractive for startups, particularly deep-tech and biotech firms that require longer gestation periods to achieve profitability. A dedicated working group has been constituted to review and propose changes to the Innovators Growth Platform (IGP).
Acknowledging that the existing platform has not achieved the desired success, Pandey stated that the regulator is exploring ways to help early-stage companies raise capital from public markets more easily. The proposed reforms will emphasize clear risk disclosures for investors regarding these ventures while offering them opportunities to participate in the long-term growth potential of emerging sectors.
