In a move that could potentially save time for users dealing with disputed failed UPI (Unified Payments Interface) transactions and enhance the efficiency of the dispute resolution process, the National Payments Corporation of India (NPCI) has now automated the acceptance and rejection process for chargeback requests. If you experience a failed UPI transaction and have not yet received a refund, then you need to raise a chargeback request with your bank. This request, which is raised by your bank, can now be settled faster than earlier, as the process for accepting or rejecting it has become automated. In a circular dated February 10, 2025, NPCI has said that under the new rule, chargeback requests will either be automatically accepted or rejected on the basis of transaction credit confirmation (TCC) or return requests (RET) filed by the beneficiary banks.
TCC or RET serves as communicators regarding the status of the transaction, indicating whether the money is with the beneficiary bank or not. If the money is already with the beneficiary bank, then the transaction is deemed successful, and there is no need for a chargeback request. If the money couldn’t be credited to the beneficiary bank for any reason, then it will be returned to the customer of the remitter bank. This entire process earlier involved manual reconciliation.
Although this new process for handling chargeback requests related to UPI transactions is directed towards banks, experts say this is an important step towards making the UPI dispute management system more seamless and effective. So, consumer experience with UPI, specifically with disputed transactions, may improve once this revised chargeback process is implemented from February 15, 2025.
What did NPCI say about the new UPI chargeback process?
The National Payments Corporation of India (NPCI), in a circular dated February 10, 2025, said:
“Chargebacks are often initiated by remitting banks before beneficiary banks can act on UPI deemed approved transactions, because the current process allows remitting banks to raise chargebacks from T+0 onwards in URCS, due to which beneficiary banks are not getting sufficient time to reconcile and process returns (RET)/TCC proactively before a dispute is taking shape of chargeback. There were instances where beneficiary banks have raised RET and didn’t check the status of returns; they have been rejected because the chargeback is already raised, and the chargeback has been closed on a deemed acceptance basis along with an RBI penalty. To address these challenges and improve the efficiency of dispute resolution, we are implementing auto acceptance/rejection of chargebacks based on the TCC/RET raised by the beneficiary bank in the next settlement cycle after the chargeback is already raised. Note, this revised process is applicable only for the bulk upload option & UDIR not in the front-end option.”
What does this mean?
Aviral Kapoor, Partner, Alagh & Kapoor Law Offices, says this circular is about making the UPI chargeback system more efficient.
“Banks sending money were raising chargebacks too fast. Now, if the receiving bank says, “Wait, there is a problem (soon raises a RET or TCC), the system will consider it. If they wait too long, the chargeback will be automatically accepted, favouring the sender. Think of it like this: the sender complains first, but the receiver gets a short time to respond before the complaint is automatically accepted,” says Aviral.
Shri Venkatesh, Managing Partner, SKV Law Offices, explains that at present, remitting banks can initiate a chargeback request before the beneficiary bank has had adequate time to process a return request (RET) or transaction correction case (TCC). “This often leads to situations where the beneficiary bank has already started processing a return, but due to the simultaneous raising of a chargeback, the return gets rejected and the chargeback is closed automatically, sometimes resulting in penalties imposed by the RBI for the bank,” adds Venkatesh.
To address this issue, NPCI has introduced an auto-acceptance and rejection mechanism based on the TCC or RET status. Venkatesh says, “Under this system, if a beneficiary bank has already raised a return before the chargeback is settled, the system will automatically decide whether to accept or reject the chargeback, preventing duplicate claims and unnecessary disputes.”
What might be the impact of this new chargeback process for UPI transactions?
We have asked various experts about the possible impact, and here’s what they said:
Utkarsh Bhatnagar, Partner, Cyril Amarchand Mangaldas: The NPCI’s latest directive streamlines the reconciliation process between customer and merchant banks. Critically, customer-initiated chargebacks or refund requests, lodged prior to the merchant bank’s payment acceptance, will now take precedence, thereby reducing the number of disputes and expediting resolutions.
Shri Venkatesh, Managing Partner, SKV Law Offices: For consumers, this change is expected to improve the speed and efficiency of dispute resolution. It should reduce confusion and the likelihood of prolonged disputes in cases of unauthorised transactions. If a refund has already been initiated by the beneficiary bank, the system will recognise it and automatically reject any subsequent chargeback requests. Conversely, if a chargeback is raised without a prior refund, it will be automatically accepted, ensuring a structured resolution process. While this change primarily affects the way banks handle bulk chargeback claims, it is an important step towards the attempts of making the UPI dispute management system more seamless and effective.
Aviral Kapoor, Partner, Alagh & Kapoor Law Offices: For consumers, this could mean slightly fairer chargeback decisions in the long run. The system might become a little more efficient, but you may not see a big change in your daily UPI use. It’s mostly about making things smoother between banks, which indirectly benefits users by improving the system’s fairness.
Kritika Seth, Founding Partner, The Victoriam Legalis (TVL): The new automated system aims to streamline chargeback resolutions based on transaction compliance codes (TCC) and return requests (RET), addressing issues caused by T+0 chargebacks, which have limited banks’ ability to manage returns and adjustments. These reforms are expected to reduce disputes and financial penalties for member banks, although they may not directly impact UPI users.
