Big Change in UPI Refund Rules from July 15
From July 15, banks can process UPI refunds for fraud, failures, and merchant issues without NPCI’s approval, helping customers faster.
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Banks will soon have greater autonomy in resolving Unified Payments Interface (UPI) transaction disputes, as per a new directive from the National Payments Corporation of India (NPCI).
Effective July 15, 2025, banks can initiate chargebacks on disputed UPI transactions — including fraud, failed transfers, and merchant issues — without requiring NPCI’s prior approval.
The announcement came via NPCI’s circular (No. 184B/2025-2026), issued on June 20. The move enables banks to bypass existing system blocks triggered by negative chargeback patterns, provided internal assessments confirm the customer’s claim is legitimate.
Banks will now be able to raise “good faith” chargebacks, termed RGNB (Remitting Bank Raising Good Faith Negative Chargeback), even after crossing rejection thresholds previously enforced by the NPCI.
Earlier, systems would auto-restrict further chargebacks if prior disputes linked to an account or UPI ID exceeded set limits — 11 for account-based and 6 for UPI ID-based cases — under reason codes CD1 or CD2.
Banks had to manually request NPCI to “whitelist” such disputes, delaying refunds. With the RGNB rule, the remitting bank can proceed independently, provided due diligence confirms the complaint’s validity.
NPCI clarified that RGNB chargebacks may only be used in cases where the URCS (UPI Risk Control System) rejects a chargeback under CD1 or CD2 codes. The RGNB option is restricted to front-end systems and cannot be applied to bypass regulatory requirements or avoid penalties.
“Any misuse of this facility to escape prescribed compensation or penalty obligations will be treated as non-compliance,” the circular warned.
The new provision covers typical UPI issues such as:
• Fraudulent transactions debiting user accounts
• Failed payments where funds were debited but not credited to recipients
• Merchant-related complaints, such as undelivered goods/services
• Duplicate or erroneous payments
UPI processed over 11.4 billion transactions in May 2025 alone. Even marginal dispute rates affect millions. The rule change enables quicker action for affected users, minimizing delays in claim processing and enhancing consumer protection.
This reform is expected to streamline the grievance redressal process across the country’s fast-growing digital payment ecosystem.
