India’s securities regulator, the Securities and Exchange Board of India (SEBI), is preparing to issue an advisory warning financial market participants about emerging risks linked to artificial intelligence tools. SEBI Chairman Tuhin Kanta Pandey said the regulator is already consulting stakeholders on AI-related threats as concerns grow over how advanced AI systems could affect trading, cybersecurity, compliance, and financial stability.
The advisory is expected to focus on risks posed by increasingly powerful AI models, including autonomous systems capable of generating financial analysis, trading strategies, or cyber exploits. Regulators globally are becoming more cautious about the rapid deployment of AI in banking and capital markets, particularly after reports warned that frontier AI systems could expose weaknesses in legacy financial infrastructure and accelerate cyberattacks.
SEBI’s move reflects a broader international trend where financial regulators are trying to catch up with the pace of AI adoption. A recent global study found that many regulators lag significantly behind financial institutions in AI readiness, creating oversight gaps as banks, brokerages, and trading firms rapidly integrate generative AI into operations. Researchers have warned that overreliance on a small number of AI providers could also create systemic risks across financial markets.
India has been positioning itself as a major AI player through initiatives such as the India AI Impact Summit and expanded national AI infrastructure investments. At the same time, policymakers are increasingly aware that AI introduces new regulatory challenges involving misinformation, automated decision-making, market manipulation, fraud, and cybersecurity. Analysts believe SEBI’s upcoming advisory signals that Indian regulators are moving toward a more proactive AI governance framework for the country’s financial ecosystem.
