SEBI to issue AI risk advisory on next-gen models and cyber threats
Synopsis
SEBI is preparing to flag AI as a systemic risk to Indian capital markets — not just a compliance checkbox. Chairman Tuhin Kanta Pandey's warning about AI-powered vulnerability scanning tools signals that the regulator sees next-gen AI as a double-edged sword: efficiency enhancer and potential market destabiliser.
Key Takeaways
SEBI Chairman Tuhin Kanta Pandey announced on 4 May 2025 that an advisory on next-generation AI risks is forthcoming.
The advisory will address risks from AI-led vulnerability-scanning tools that can exploit financial infrastructure at speed and scale.
SEBI has not yet specified a timeline, nor confirmed if the advisory will be entity-specific or sector-wide.
Regulated entities have been urged to strengthen cyber resilience , implement continuous monitoring, and ensure faster remediation.
The advisory will sit within SEBI 's broader responsible innovation framework, not as a technology restriction.
Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Monday, 4 May said the market regulator will shortly issue an initial advisory on risks arising from next-generation artificial intelligence models and AI-led vulnerability-scanning tools. The announcement was made at the IMC Chamber of Commerce and Industry Capital Markets Conference in Mumbai, signalling a proactive regulatory stance as AI reshapes financial infrastructure.
What the Advisory Will Cover
According to Pandey, rapid technological advances in AI are simultaneously improving market efficiency and creating new systemic vulnerabilities. He specifically flagged the growing use of sophisticated AI systems to scan financial infrastructure for weaknesses.
Point of View
Self-improving nature. Pandey is right that a single weak link can destabilise the system — but early supervisory signals without binding follow-through have historically not moved the needle on cyber resilience in financial services.
NationPress
3 Jul 2026
Frequently Asked Questions
What is the SEBI AI risk advisory?
SEBI is preparing to release an advisory on risks from next-generation AI models and AI-led vulnerability-scanning tools used in capital markets. The advisory will serve as an early supervisory signal within SEBI's responsible innovation framework, rather than as a restriction on technology use.
Why is SEBI concerned about AI tools in financial markets?
SEBI Chairman Tuhin Kanta Pandey warned that AI systems are increasingly being used to scan financial infrastructure for weaknesses, and that these tools can exploit vulnerabilities at speed and scale. The tightly connected nature of modern markets means a single weak link can create wider systemic risks.
When will SEBI release the AI advisory?
SEBI has not specified a timeline for the advisory. Pandey described it as forthcoming and said the regulator would remain in active engagement with market participants and stakeholders on emerging technology risks.
Who is responsible for managing AI-related risks under SEBI's framework?
SEBI has placed the primary responsibility on regulated entities, urging them to proactively strengthen cyber resilience, implement continuous monitoring systems, and ensure faster remediation of identified vulnerabilities.
How does this fit into SEBI's broader regulatory approach?
The advisory is part of SEBI's push for optimum, risk-based regulation. The regulator has previously issued guidance on algorithmic trading, cybersecurity, and cloud adoption. The AI advisory is the next step in balancing market innovation with systemic resilience.
