The National Payments Corporation of India (NPCI) has announced significant changes to the handling of UPI transaction chargebacks, set to take effect from 15 February 2025. These new regulations focus on automating the acceptance and rejection process of chargebacks based on Transaction Credit Confirmation (TCC) and returns.

 

The current system has revealed several operational challenges, particularly in the timing of chargebacks. Under existing rules, remitting banks can initiate chargebacks on the same day (T+0) through the Unified Real time Clearing and Settlement (URCS) system. This immediate chargeback capability has created difficulties for beneficiary banks, who often lack sufficient time to reconcile and process returns before disputes escalate to chargeback status.

 

A significant issue has emerged where beneficiary banks, after raising returns, discover that their returns were rejected due to pre-existing chargebacks. These chargebacks are then closed on a deemed acceptance basis, resulting in RBI penalties. The new automated system aims to streamline this process by implementing automatic acceptance or rejection of chargebacks based on TCC and returns raised by beneficiary banks in the next settlement cycle.

 

It's important to note that these changes will only apply to bulk upload options and will not affect front-end operations. The NPCI has instructed member banks to communicate these changes to relevant officials within their organizations.

This regulatory update comes at a time when UPI transactions continue to show remarkable growth, with January 2025 recording 16.99 billion transactions worth Rs23.48 lakh crore, marking a new milestone in digital payments.