NPCI Introduces New Chargeback Rule for UPI Transactions From February 15

The National Payments Corporation of India (NPCI) has introduced a new chargeback rule for Unified Payments Interface (UPI) transactions, effective from 15 February 2025. The rule aims to streamline dispute resolution by automating chargeback acceptance or rejection based on Transaction Credit Confirmation (TCC) and return requests (RET).

Understanding Chargebacks in UPI Transactions

A chargeback is the reversal of a completed UPI transaction due to fraud, disputes, or technical errors. When a payer’s bank initiates a chargeback request, the amount is refunded if the request is approved. Under the current system, remitting banks can initiate chargebacks from T+0 onwards, often before beneficiary banks have reconciled transactions. This sometimes results in return requests being rejected or chargebacks being automatically accepted, leading to penalties imposed by the Reserve Bank of India (RBI).

To address these inefficiencies, NPCI has revised the dispute resolution framework. The updated system ensures that chargebacks will only be processed based on TCC or RET raised by the beneficiary bank in the subsequent settlement cycle, allowing sufficient time for reconciliation.

Implementation and Impact on Banks

From 15 February, the UPI Dispute Resolution System (URCS) will automatically accept or reject chargebacks based on TCC and RET. This new rule applies exclusively to bulk uploads and the Unified Dispute Resolution Interface (UDIR) but does not affect front-end dispute resolution mechanisms.

NPCI has instructed all UPI member banks to update their internal processes accordingly. The revised system is expected to enhance reconciliation efficiency, minimise penalties, and improve the overall dispute-handling process.

Conclusion

The introduction of an automated chargeback decision-making process in UPI transactions aims to create a more structured and efficient dispute resolution system. By giving beneficiary banks adequate time for reconciliation, NPCI seeks to reduce discrepancies and improve transaction reliability.

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