Financial Services Secretary M Nagaraju on Thursday cautioned banks and financial institutions to bolster their cyber security frameworks and operational resilience, highlighting that sophisticated artificial intelligence models such as Anthropic's 'Mythos' could present severe risks to the banking sector if made publicly available, as reported by PTI.
Addressing Risk Management Conference
Speaking at the Indian Banks’ Association (IBA) conference on Risk Management in Mumbai, Nagaraju emphasized that regulators are increasingly concerned about the capacity of advanced AI systems to detect and potentially exploit weaknesses in banking technology infrastructure.
'I hope the banking community is prepared well to face in case Mythos is released publicly in the country,' Nagaraju stated, underscoring the urgency of the situation.
Understanding the Mythos AI Threat
Referring to cyber security threats, Nagaraju explained that the Anthropic Mythos AI model possesses advanced capabilities that could expose vulnerabilities in legacy banking systems and interconnected financial networks. He warned that banks remain highly exposed due to their reliance on outdated IT infrastructure, interconnected systems, and real-time operational networks.
'One successful cyber attack can cascade quickly across institutions and markets,' he cautioned, stressing the potential for rapid contagion.
Operational Continuity as a Strategic Priority
Nagaraju emphasized that operational continuity has become central to financial stability. He urged banks to continuously test their systems and preparedness, strengthen incident response mechanisms, invest in cyber security capabilities, and ensure that business continuity plans remain practical, updated, and regularly tested.
Highlighting the changing risk environment, he noted that risks facing banks are no longer confined to balance sheets and trade books. 'In such an environment, risk management cannot be seen merely as an add-on to compliance or control functions, it must be viewed as a strategic capability,' he said.
Emerging Risk Factors
According to Nagaraju, banking risks are increasingly emerging from multiple sources:
- Geopolitical developments
- Cyber attacks
- Operational disruptions
- Fraud
- Third-party dependencies
- Climate-related concerns
- Market volatility
- Changing customer behavior
He, however, noted that the Indian banking sector has significantly strengthened over recent years through improved asset quality, stronger balance sheets, better capital positions, and enhanced governance standards.
The secretary's remarks serve as a wake-up call for the banking industry to proactively address emerging technological threats and integrate robust risk management practices into their core strategies.
