UPI Transactions New Rules: Effective from February 15, 2025
The National Payments Corporation of India (NPCI) has introduced new guidelines for UPI transactions, focusing on the auto acceptance and rejection of chargebacks based on Transaction Credit Confirmation (TCC) and returns.
These changes aim to streamline chargeback processing, reduce disputes, and improve the efficiency of digital payments. The new rules will come into effect on February 15, 2025.
Let’s dive into what chargebacks are, why this change was needed, and how it will impact banks and UPI users.
What Are Chargebacks in UPI?
A chargeback is a process where a bank reverses a transaction due to disputes, fraud, or errors.
🔹 Who raises chargebacks?
Chargebacks are typically initiated by the remitting bank (payer’s bank) when a transaction issue is detected.
🔹 Why are chargebacks raised?
If a UPI transaction is deemed approved but has errors, the remitting bank may initiate a chargeback before the beneficiary bank (receiver’s bank) can reconcile the payment or process a return.
🔹 Current issue with chargebacks
The remitting bank can raise chargebacks from T+0 (same day) onwards under the Unified Real-time Clearing and Settlement (URCS) system. However, this leaves the beneficiary bank with little time to verify or return the disputed funds before the chargeback is closed.
Where Does the Problem Arise?
📌 Key issue: Beneficiary banks do not get enough time to process returns before a chargeback is finalized.
- In some cases, beneficiary banks return the funds without realizing that the chargeback has already been raised and closed.
- This results in duplicate transactions, reconciliation errors, and RBI penalties for banks.
💡 Example:
1️⃣ A user sends money via UPI.
2️⃣ An issue occurs, and the remitting bank raises a chargeback on the same day (T+0).
3️⃣ The beneficiary bank tries to return the money, but the chargeback has already been closed automatically.
4️⃣ The beneficiary bank gets penalized for not verifying the chargeback status before returning the funds.
How Will the Issue Be Resolved?
To fix this, NPCI has introduced auto acceptance and rejection of chargebacks based on TCC (Transaction Credit Confirmation) and return status raised by the beneficiary bank.
✅ What’s changing?
- If a chargeback has already been raised, the system will automatically accept or reject further chargebacks/returns based on TCC.
- This will prevent beneficiary banks from mistakenly returning funds after a chargeback is closed.
- The new system will be implemented in URCS (Unified Real-time Clearing and Settlement) from February 15, 2025.
✅ Who does this affect?
- Banks and financial institutions using UPI.
- UPI payment platforms like GPay, PhonePe, Paytm.
- UPI users who frequently deal with refunds or disputed transactions.
📌 Important Note:
This rule applies only for bulk transactions and UDIR (Unified Dispute Resolution) processes. It will not be applicable for front-end dispute resolution options.
What Do Banks Need to Do?
NPCI has directed member banks to:
✔ Implement auto chargeback resolution in their URCS systems.
✔ Train their teams on the new chargeback processing rules.
✔ Update their digital payment infrastructure to support seamless transaction reconciliation.
UPI’s Continued Growth in India
UPI continues to dominate digital payments in India.
📈 According to NPCI’s latest data:
- 16.99 billion UPI transactions were recorded in January 2025.
- The total transaction value reached ₹23.48 lakh crore.
This rapid growth highlights the importance of efficient dispute resolution mechanisms to ensure a seamless payment experience for users.
Final Thoughts: What This Means for You
💡 For Banks & Payment Platforms:
✔ More efficient chargeback processing and fewer RBI penalties.
✔ Reduced reconciliation errors and better customer satisfaction.
💡 For UPI Users:
✔ Faster resolution of transaction disputes.
✔ Reduced delays in refunds or reversals.
✔ Increased trust in digital payments.
🚀 As UPI transactions continue to grow, these new rules will enhance the efficiency and security of digital payments across India.
🔎 Need more clarity on UPI rules?
💬 Drop your questions in the comments, and we’ll be happy to help! 🚀
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