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The National Payments Corporation of India (NPCI) has announced some changes to Unified Payments Interface (UPI) transactions from February 15, 2025. The changes are primarily regarding auto acceptance and rejection of chargebacks, thereby making the system more efficient.

Presently, the remitting banks raise chargeback from T+0 onwards in the Unified Dispute Resolution Interface (UDIR). This often gives beneficiary banks insufficient time for reconciliation and processing of returns.

It has often led to cases where returns have been rejected, when chargebacks have already been initiated, resulting in penalties from RBI.

WHAT NEW RULES SAY?

The new system will use Transaction Credit Confirmation (TCC) and will implement auto acceptance/rejection of chargeback, thereby eliminating the need for manual intervention. The move will reduce delays and confusion.

According to NPCI, the new rule applies only to bulk uploads and UDIR. It excludes front-end dispute resolution.

Also, the beneficiary banks will have time for transaction reconciliation.

WHY DO CHARGEBACKS OCCUR?

Chargebacks happen when a UPI transaction which initially was approved is reversed.

It can occur if a customer does not acknowledge the payment, raises disputes with the bank regarding the payment, or is charged for the item that has not been delivered.

At times, errors like duplicate payments or technical glitches during processing also cause chargebacks.

Such issues confuse and pose challenges during the reconciliation process for both the bank as well as the customers. This requires thorough investigation and resolution to avoid financial discrepancies.

The new system aims to streamline dispute resolution, complexities and delays. It also aims to minimise penalties, while enhancing the overall reconciliation efficiency and smoother transaction processing.