SEBI Develops AI Tool to Assess Cyber Safety of Regulated Entities

In a significant step toward strengthening cybersecurity oversight in India’s financial markets, the Securities and Exchange Board of India (SEBI) is developing an artificial intelligence-powered tool to analyze the cyber safety preparedness of regulated entities. The initiative, announced by SEBI Chairman Tuhin Kanta Pandey, aims to enhance risk-based supervision through automated analysis of cyber audit reports, identification of control gaps, and risk-based classification of market participants.

The AI-driven inspection tool is currently under development and will evaluate cyber audit submissions from regulated entities to detect vulnerabilities and assess compliance with cybersecurity standards. By processing large volumes of audit data, the tool seeks to improve the efficiency and effectiveness of SEBI’s supervisory functions, enabling proactive intervention where risks are identified.

Alongside the tool’s development, SEBI is constituting a dedicated working group to formulate a comprehensive technology roadmap for market infrastructure institutions (MIIs), including stock exchanges, depositories, and clearing corporations. This roadmap will outline a strategic vision for technology adoption, risk management, and cyber resilience over the next five and ten years, aligning with SEBI’s broader goal of ensuring that innovation supports, rather than undermines, market integrity.

Chairman Pandey emphasized the importance of building enduring market institutions through evolving regulatory frameworks and adaptive systems. “Enduring markets are not built on momentary highs or cycles of optimism. They are built on institutions that inspire trust, regulation that evolves with markets, and systems that continuously adapt and upgrade,” he stated during his address at the BSE’s Sensex 40th anniversary event.

The initiative reflects SEBI’s ongoing focus on leveraging technology to strengthen regulatory architecture amid growing investor participation and market complexity. By integrating AI into supervisory processes, SEBI aims to enhance its capacity to monitor cyber risks in real time and promote a culture of continuous improvement in cyber resilience across the securities market ecosystem.

As cyber threats continue to evolve in sophistication and frequency, SEBI’s proactive approach underscores its commitment to safeguarding investor interests and maintaining the stability and integrity of India’s securities markets through innovation-driven regulation.