AI sharpens cyber battle across financial markets

Artificial intelligence is accelerating both cyber attacks and defensive capabilities across India’s securities market, prompting the Securities and Exchange Board of India to warn that gaps in technology, skills and third-party security could expose the wider financial ecosystem.

SEBI Executive Director Avneesh Pandey has described cybersecurity as an escalating contest in which attackers repeatedly probe financial systems while gaining access to increasingly sophisticated AI-enabled tools. The technology is effectively “supercharging the cyber arms race”, strengthening automated threat detection and response while also allowing attackers to develop more convincing, adaptable and scalable techniques.

The warning comes as financial institutions, exchanges, brokers, asset managers and market infrastructure providers expand their dependence on interconnected digital platforms. Cybersecurity weaknesses within vendors, technology suppliers and other third parties can therefore spread beyond a single organisation and become a market-wide operational risk.

Pandey highlighted disparities in cyber preparedness across regulated organisations. Differences in resources, digital infrastructure, governance standards and access to qualified specialists mean some entities remain better equipped than others to detect and contain attacks. Weaknesses at smaller participants can create vulnerabilities across supply chains linking them with larger institutions.

SEBI Chairman Tuhin Kanta Pandey has separately pushed financial institutions to treat cyber defence as a board-level responsibility rather than a function confined to information technology teams. The regulator views cybersecurity as closely linked to business continuity, investor confidence and market integrity because disruption at one interconnected institution can affect other entities using common platforms, vendors or service providers.

The regulator’s Cybersecurity and Cyber Resilience Framework is increasingly being tested by the speed at which threat actors can adopt generative AI, automation and other emerging technologies. AI can help attackers refine phishing campaigns, accelerate vulnerability discovery and produce malicious content at scale. Defenders are simultaneously deploying machine learning to identify anomalous behaviour, automate alerts and analyse large volumes of security data.

SEBI’s own use of artificial intelligence is expanding. Its Project SUDARSAN platform uses multimodal AI to examine public social-media content, including videos, images, messages and advertisements, for signs of impersonation, unauthorised advice and misleading investment claims. The system, operational since November 2025, identified more than 20,000 instances of fraudulent content and posts by the end of the 2025-26 financial year.

Another AI-driven tool, RDAR, has been deployed to assist in reviewing advertising and investor-education material issued by asset management companies. It is designed to detect compliance problems such as missing disclaimers and financial products presented as educational material.

Cyber incidents remain a persistent concern. Thirty-six incidents were reported to SEBI through its cyber incident reporting portal during 2025-26. Data exfiltration accounted for eight cases, ransomware seven and security misconfiguration six. Malware was associated with four incidents, while distributed denial-of-service attacks and unauthorised access accounted for two each.

The regulator has also established Market Security Operations Centres through the NSE and BSE to give smaller regulated entities access to monitoring, detection and incident-response capabilities that may otherwise be difficult to maintain independently. A total of 376 regulated entities, including stock brokers, portfolio managers, alternative investment funds and credit-rating agencies, had joined the shared facilities by March 30, 2026.

Cybersecurity skills are emerging as another pressure point. SEBI’s five-day Cyber Defence Symposium, running from August 17 to 21 at the National Institute of Securities Markets, has brought together participants from 15 jurisdictions for exercises covering AI, incident response, blockchain, quantum computing and red-team operations. The programme includes simulated attacks and tabletop exercises intended to improve operational preparedness.

NISM is also developing cybersecurity and cyber-resilience certification programmes at GIFT IFSC covering security operations centres, threat detection, penetration testing, cyber audits, business continuity, disaster recovery, third-party risks and regulatory reporting. The initiative reflects growing demand for professionals able to combine technical expertise with knowledge of financial-market regulation.