There are restrictions n compliances to be followed for doing CC business in our market. In the initial stages, it would be easy - but as the volume n complexity n reach grows exponentially, it is difficult to put it (the CC business) within the framework of banking - to comply with the guidelines. Hence, we see separate companies/firms being floated exclusively for CC business. For ex - SBI Cards, BOB Fin.... In such cases, these WOSC - wholly owned subsidiary companies - does not come under the BRA, IBA.... as they are not strictly Banks - legally speaking. Owned by Banks but functionally not banks. Like any other business, they get a loan-capital-working capital and have to pay a dividend to the owner banks.
How they operate is akin to our own individual overdraft current accounts - limit is notional n for operational control. Purely based on the total transactions value - which is treated as clean overdraft. The credits are the MDR commissions, POS Rents they get, and the monthly interests they charge on part-payments n EMIs, besides the promotional charges refunded by corporate tie ups. Like in any lending, sufficient provisions are made for bad n doubtful CC accounts. And, the charges incurred for all types of followup, recovery infra, n the operating costs like communications....
As the business cycles are monthly, there are quick monitoring tools to see, control n report the mismatch between the debits n credits - like in any other business cash-book style.
At the end of each month, depending upon the net, profit or loss, suitable managerial inputs are given to the operating teams to monitor n control.
Unlike housing loans or business loans (C&I, SIB, SME or agri) or vehicle loans - where assets are created n the repayment is relatively stable on expected lines, CC business is more riskier n therefore based on more discretion powers - at times looking very illogical or strange. Unlike the EduLoans - where refinance n subsidy benefits are given, CC business is not having that sort of luxury.
The total approvals - on a daily basis - are monitored closely. Daily/weekly/monthly inflows n outflows are strictly monitored. Seasonal changes - like Great Indian Shopping Festivals by Amazon, FK.... - are also factored in such monitoring.
This is like any other commodity businesses during the festive seasons or during calamities or down turn in business due to cycles or external factors.
The Funds Management Dept of a CC Business is not very different from the FMD of any other business. Mostly Cash ins n cash outs. Whereas in Bank's FMD also has to handle TM - Treasury Management functions. And, bankers got a lot of tight rope walking to do - for meeting the mandatory segment-wise lendings - like Priority Sector, Direct Agri, Allied Activities.... Which are quota based. If these parameters are not met, they attract penalties. Such segment-wiser compliances are not there in CC business - as such - but the owner-Banks may stipulate their own internal allocated targets.
This broadly is in a nutshell. Considering the scope of this community/forum.
If someone is seriously interested in knowing the nitty gritties, one must be prepared to spend considerable time studying in a CC Head Office - AND - in the Head Office of a Bank to understand the differences between the two different businesses. Despite the common names like FMD n TM in both, they are not comparable in any sense.
And, such studies must last at least one year - to have a fairly good idea about these activities.
All the best if someone is interested to invest that sort of effort n time. And, get proper prior approvals to get into these highly monitored areas.
