THESE UPI chargeback rules will come into force from July 15. Check details here | Mint

National Payment Corporation of India (NPCI) has announced a modification in UPI chargeback rules and procedures per a circular dated June 20.

The latest announcement has simplified the rules which govern declined chargebacks. Currently, when UPI chargeback requests are declined (because too many such requests were raised) but the due diligence shows that the chargeback was indeed genuine. Then the bank in those cases can raise a request to NPCI for whitelisting the dispute post through URCS.

Now the new rule states that the banks do not need NPCI intervention for whitelisting the disputes.

What do the new rules state?

NPCI has simplified the process as it allows issuing/remitting banks to raise chargeback. This good faith dispute is named as RGNB (remitting bank raising good faith negative chargeback).

RGNB adjustment should be raised by the issuing/remitting bank only when URCS (Unified Real-time Clearing and Settlement). declines the normal chargeback with CD1 and CD2 reason code.

This option is available only through the front end. This option should not be used to avoid any compensation and penalties, and any deviation will be treated as non-compliance to the NPCI guidelines.

The circular states that member banks are advised to take a note and disseminate the information to the officials concerned.

This functionality will be implemented in URCS with effect from July 15, 2025.

Why were caps put on chargebacks?

This latest circular is a follow up notification to the previous one that was issued on Dec 5, 2023, which stated that a section of the users was trying to exploit the chargeback procedure to gain unduly.

To bring more discipline and efficiency into the process, NPCI in Dec 2024 had rolled out certain changes which put a cap on total chargebacks which stands at 10 per customer in 30 days rolling and 5 chargebacks per payer and payee combination in 30 days rolling. NPCI also reduced the turn-around time to 30 days for raising chargeback on small and offline merchants.

What are the reason codes CD1 and CD2?

The reason code CD 1 refers to declining the 11th chargeback for IFSC and account combination, and reason code CD2 refers to declining the 6th chargeback for payer-payee combination. As explained in the background above, NPCI – in Dec 2023 – put a cap on the number of chargebacks each month. These caps were 10 per customer and 5 per payer-payee combination. So, when the 11th or 6th chargeback is claimed, it is rejected with reason CD1 or CD2 respectively.

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