Advanced AI Could Trigger Banking Cyber Risks If Released Publicly: Nagaraju

Mumbai, May 8 (KNN) Department of Financial Services Secretary M Nagaraju has asked banks and financial institutions to strengthen cybersecurity systems and operational resilience.

He warned that advanced artificial intelligence models such as Claude and Anthropic’s ‘Mythos’ could pose serious risks if deployed publicly in India.

Speaking at the Indian Banks’ Association Conference on Risk Management in Mumbai, Nagaraju said regulators were increasingly concerned about the ability of advanced AI systems to identify and potentially exploit vulnerabilities in banking infrastructure.

“I hope the banking community is prepared well in case Mythos is released publicly in the country,” TOI quotes him as saying. 

Banks Asked To Strengthen Cyber Preparedness 

He noted that banks remain vulnerable due to their dependence on legacy IT systems, interconnected networks and real-time operational infrastructure.

Nagaraju warned that a successful cyberattack could quickly spread across institutions and financial markets, making operational continuity a critical component of financial stability.

He urged banks to regularly test their systems, strengthen incident response mechanisms and invest in cybersecurity capabilities to address emerging threats.

Risk Management Must Go Beyond Compliance 

Nagaraju also said business continuity plans should remain practical, updated and be tested regularly to ensure preparedness.

Highlighting the evolving risk landscape, Nagaraju said banking risks are no longer limited to balance sheets and trade operations, but are increasingly linked to geopolitical developments, cyberattacks, operational disruptions, fraud, third-party dependencies, climate risks, market volatility and changing customer behaviour.

“In such an environment, risk management cannot be viewed merely as a compliance function but must be treated as a strategic capability,” he said.

He added that India’s banking sector has become stronger in recent years through improved asset quality, stronger balance sheets, better capital positions and enhanced governance standards.

(KNN Bureau)