Banks must prepare for cyber threats posed by AI models like Mythos: Nagaraju

Mumbai: DFS Secretary M Nagaraju on Thursday urged banks to strengthen their cyber security and operational resilience, cautioning that advanced artificial intelligence models such as Anthropic Mythos could pose significant risks to the banking system if released publicly.

"I hope the banking community is prepared well to face in case Mythos is released publicly in the country," Nagaraju said, while addressing at the Indian Banks' Association (IBA) conference on Risk Management in Mumbai.

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Referring to cyber security concerns, he said Anthropic Mythos AI model has advanced capabilities to identify and potentially exploit systems, and added that it has raised alarm bells among regulators because of the vulnerabilities in legacy banking technology systems.

Nagaraju said banks and financial institutions remain highly vulnerable because of their interconnected systems, dependence on legacy IT infrastructure and real-time operations.

"One successful cyber attack can cascade quickly across institutions and markets," he warned, stressing that operational continuity is now central to financial stability.

Nagaraju said banks must continuously test their resilience, strengthen incident response mechanisms, invest in cyber capabilities and ensure that business continuity plans are practical, updated and regularly exercised.

Highlighting the broader risk environment, he said risks are no longer confined to trade books or balance sheets and now arise from geopolitical developments, cyber threats, operational disruptions, fraud, third-party dependencies, climate considerations, market volatility and changing customer behaviour.

"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.

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Nagaraju noted that the Indian banking sector has made significant progress in recent years with stronger balance sheets, improved asset quality, robust capital positions and enhanced governance standards.

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