New UPI rule on automatic acceptance, rejection of chargebacks from Feb 15

Process will apply only to bulk transaction uploads and not to those done by individuals

The National Payments Corporation of India (NPCI) has released new guidelines for Unified Payments Interface (UPI) transactions, outlining the automatic acceptance or rejection of chargebacks based on Transaction Credit Confirmation (TCC) and returns.

 

The new policy will take effect from February 15, according to a circular by NPCI.

 

What is a chargeback

 

A chargeback is the reversal of a completed UPI transaction due to disputes, fraud or technical error. It is initiated by the payer's bank, and if successful, the transaction amount is returned to the payer.

 

Remitting banks can initiate chargebacks in the UPI Dispute Resolution System (URCS) from T+0 onwards. Such initiation often precedes reconciliation efforts of beneficiary banks, leaving them with insufficient time to process returns before a chargeback is raised. Beneficiary banks have sometimes raised return requests (RET) but were rejected because a chargeback had already been initiated, leading to automatic closure of the chargeback with a deemed acceptance. This process has also resulted in penalties imposed by the Reserve Bank of India (RBI).

 

To mitigate such issues, NPCI has revised the dispute resolution process, ensuring that chargebacks will now be automatically accepted or rejected based on the TCC/RET raised by the beneficiary bank in the next settlement cycle after the chargeback has been initiated.

 

Key highlights of the new mechanism

 

The auto acceptance/rejection functionality will be implemented in the UPI Dispute Resolution System (URCS) from February 15.

 

This process will be applicable only for bulk upload options and Unified Dispute Resolution Interface (UDIR) and will not impact front-end dispute resolution options.

 

Beneficiary banks will now have an opportunity to reconcile transactions efficiently before chargebacks are deemed accepted.

 

Implications for UPI member banks

 

NPCI has advised all UPI member banks to take note of the changes and disseminate the information among their concerned officials. The new process is expected to improve the efficiency of handling disputes, reducing unnecessary penalties and ensuring a smoother transaction reconciliation process.

 

The use of UPI for daily transactions has seen a significant rise. According to data from December 2024, UPI transactions hit a record high of 16.73 billion, marking an 8 per cent increase from November.