BFSI Insight Summit: Sebi explores domestic AI model for securities market

Will review compliance burden on FPIs, changes in SME framework: Pandey

The Securities and Exchange Board of India (Sebi) is exploring a domestically developed artificial intelligence (AI) model for the securities market, reviewing compliance requirements for foreign portfolio investors (FPIs) and considering changes to the small and medium enterprise (SME) framework.

 

“Given concerns about the confidentiality and availability of frontier AI models, we are also exploring the possibility of developing a securities-market-specific AI model that could be built and governed domestically as a form of Digital Public Infrastructure,” said Sebi Chairman Tuhin Kanta Pandey at the concluding day of the Business Standard BFSI Insight Summit, on Wednesday.

 

The regulator is also working to implement the International Organization of Securities Commissions’ (IOSCO’s) supervisory toolkit for AI in India’s securities market. “This will support risk management and the development of an agile AI governance framework,” Pandey said. IOSCO, an association of securities and futures market regulators worldwide, has been working with regulators to address the AI risks.

 

 

On foreign investment, Sebi plans to issue a consultation paper seeking views on aligning some Indian compliance requirements with global standards. While it has streamlined access, eased digital onboarding and simplified procedures for foreign portfolio investors (FPIs), Pandey said some requirements remained more onerous than those in other major jurisdictions.

 

“We are reviewing these requirements and will issue a consultation paper to seek views on aligning them with global standards, while preserving the safeguards needed for investor protection and market integrity,” he said.

 

Sebi is also reviewing the SME framework, including proposals to determine issuer eligibility based on post-issue market capitalisation and require larger issuers to follow Indian Accounting Standards. The measures aim to ensure market growth is backed by robust governance, credible disclosures and sound risk management, he said.

 

Sebi has also proposed amendments to its Listing Obligations and Disclosure Requirements regulations to strengthen monitoring and disclosure of the use of issue proceeds. The proposals include requiring monitoring agencies to submit reports directly to stock exchanges within a prescribed timeline.

 

The regulator has also proposed extending the information technology and cybersecurity framework applicable to market infrastructure institutions to their subsidiaries. It is planning a training programme with the National Institute of

 

Securities Markets and Rashtriya Raksha University to help engineers managing security operations centres use AI tools to analyse alerts and develop automated responses.

 

The Sebi Chairman said market capitalisation as a share of gross domestic product had risen from 69 per cent in FY16 to about 130 per cent in FY27. Outstanding corporate bonds had reached nearly ₹61 trillion, equivalent to close to 55 per cent of bank credit to industry and services.

 

“The next phase calls for sustained work to widen financing opportunities, deepen participation and ensure that the market can serve the economy through different conditions,” Pandey said.

 

“We need deeper equity, corporate bond, REIT (real estate investment trust) and InvIT (infrastructure investment trust) markets. This requires a broader issuer base, stronger secondary-market liquidity and greater participation by institutional investors,” he added.