The National Payments Corporation of India (NPCI) has introduced a new rule for handling chargebacks in Unified Payments Interface (UPI) transactions. Starting February 15, chargebacks will be automatically accepted or rejected based on Transaction Credit Confirmation (TCC) and return requests (RET).

What is a chargeback?

A chargeback reverses a completed UPI transaction due to disputes, fraud, or technical errors.

The payer’s bank initiates the process, and if approved, the payer gets a refund.

Why the change?

Currently, remitting banks can initiate chargebacks from T+0 onwards. This often happens before beneficiary banks have time to reconcile transactions, leading to rejected return requests.

In some cases, chargebacks are closed automatically with deemed acceptance, causing penalties imposed by the Reserve Bank of India (RBI).

To fix these issues, NPCI has changed the dispute resolution system. Now, chargebacks will be processed based on the TCC/RET raised by the beneficiary bank in the next settlement cycle.

Key highlights of the new system

• Auto acceptance/rejection will be applied in the UPI Dispute Resolution System (URCS) from February 15.
• The new rule applies only to bulk upload options and Unified Dispute Resolution Interface (UDIR), not front-end dispute resolution.
• Beneficiary banks will have time to reconcile transactions before chargebacks are finalised.

Impact on banks

NPCI has asked all UPI member banks to inform relevant officials about the update. The change is expected to streamline dispute handling, reduce penalties, and improve reconciliation efficiency.