SEBI Considers Domestically Governed AI Model for Securities Market Supervision

The Securities and Exchange Board of India (SEBI) is working on implementing a global supervisory toolkit for artificial intelligence and is considering the development of a domestically governed AI model specifically tailored for the securities market. SEBI Chairman Tuhin Kanta Pandey announced these initiatives on Wednesday at a summit in Mumbai.

Speaking at the event, Pandey explained that SEBI is implementing the International Organization of Securities Commissions' supervisory toolkit. This move is aimed at strengthening risk management and establishing an agile governance framework for the use of artificial intelligence in the financial sector.

As part of this technological exploration, SEBI is looking into a securities market-specific AI model built and governed domestically as a form of digital public infrastructure. Pandey noted that while AI-enabled tools have the potential to improve services, risk assessment, and market supervision, their deployment necessitates reliable data, effective oversight of models, and clear accountability for decisions.

In addition to technological updates, SEBI is reviewing compliance requirements for foreign investors. The regulator plans to issue a consultation paper seeking public and stakeholder views on aligning these compliance mandates with global standards.

Pandey pointed out that although India has streamlined market access, eased digital onboarding, and simplified procedures for overseas investors, certain domestic compliance requirements remain more onerous compared to those in other major jurisdictions.

Emphasizing the importance of international capital, Pandey stated that India will need both domestic and foreign capital to support its growth ambitions, noting that international participation broadens the pool of capital and brings valuable expertise.

Previously, in August, reports indicated that SEBI planned to relax disclosure requirements for certain offshore funds categorized as high-risk. This follows earlier rules introduced during scrutiny of offshore investors linked to the Adani Group, which had triggered complaints and legal challenges.

"SEBI's exploration of a domestically governed AI model marks a significant step toward modernizing market supervision through digital public infrastructure. At the same time, reviewing foreign investor compliance requirements is a crucial move to ease capital flow while maintaining robust regulatory standards. Balancing technological innovation with transparent compliance will ultimately strengthen confidence across the Indian financial ecosystem." — Dr. Shishir Gupta, Founder & CEO, StartupLanes