KYC in Indian Banking: CDD vs EDD Explained

02 Jul 2026 · 2 min read · 1 views

CDD EDD Sanctions

Know Your Customer (KYC) is the process banks use to verify a customer's identity and assess risk before and during a banking relationship, forming the first line of defence against fraud and money laundering.

Customer Due Diligence (CDD). The baseline KYC applied to every customer: verifying identity and address using officially valid documents, understanding the nature of the customer's business or income, and screening against sanctions lists.

Enhanced Due Diligence (EDD). A deeper level of scrutiny applied to higher-risk customers — for example, politically exposed persons (PEPs), customers from high-risk jurisdictions, or accounts with unusual transaction patterns. EDD typically involves additional documentation, senior management approval, and more frequent monitoring.

Ongoing monitoring. KYC is not a one-time exercise. Banks periodically re-verify customer information and monitor transactions for patterns that could indicate suspicious activity, which may trigger a Suspicious Transaction Report (STR).

Robust KYC protects both the bank and genuine customers by making the financial system harder to misuse for illicit purposes.

Frequently Asked Questions

Re-KYC frequency depends on the customer's risk category — high-risk customers are typically reviewed more often (for example annually) than low-risk customers, per RBI's risk-based approach.

A PEP is an individual who holds or has held a prominent public function, such as a senior government or judicial official, and is therefore considered higher risk for corruption-related money laundering.

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