How are refunds processed in the Indian payment system?

The way refunds are processed by payment systems in India depends on the specific payment method and the policies of the financial institution concerned. Below is the refund process and considerations for major payment channels:

I. Refund mechanisms for mainstream payment methods

1. UPI (Unified Payment Interface)

• Immediacy: real-time under normal circumstances (within 2 hours)
• Special scenario: if the payee's account is abnormal, it will take up to 5 working days.
• Reverse transaction: reversal request to be initiated via *99# service menu or bank APP

2. card payment

   • credit cards::
   • Standard processing time: 3-7 working days
   • International card organisation transactions may be extended to 30 days
   • debit cards::
   • NEFT refunds are usually made within 24 hours.

3. E-wallets (Paytm/PhonePe etc.)

• The platform credit system affects processing speed:
  • KYC certified users: 6-hour fast track
  • Basic account: 48-hour review period

II. Key Regulatory Requirements (RBI Guidelines)

1. Statute of limitations::

• PSPs must provide a clear interface for refund status tracking

• Rs 10 lakh transactions require additional verification layer

2. Dispute Resolution::

• Chargeback window of 45 days (Visa/Mastercard rules)

III. Details of the refund process in the Indian payment system (continued)

3. Refund policy of e-commerce/merchant platforms

• Automated Processing vs.::

  • Automatic refunds: Applies to pre-authorised transactions (e.g. hotel/flight bookings), usually within 2-3 days of cancellation.
  • manual review: High-risk orders (e.g., high dollar amounts, new users) may take 1-5 business days to validate.

• the carte blanche principle::

  • RBI regulations state that refunds must be returned to the original method of payment (no replacement of bank account or wallet).
  • Exception: If the original channel fails (e.g. expired bank card), the consumer is required to provide a substitute account and sign a written statement.

4. Differences in NEFT/RTGS/IMPS transfers

⚠️ Note: Delays may occur during holidays and RBI system maintenance.

IV. Common problems and solutions

1. "Charged but not refunded" →

   • Check UPI ID/VPA statusSome wallets require manual "acceptance" of refund requests.
   • UTR number of NEFT can be tracked within bank apps like ICICI/HDFC.

2. Cross-border payment disputes::

   • The intermediary bank for SWIFT refunds may charge a fee of ₹500-2000.
   • International gateways such as PayPal usually take 10+ business days to investigate.

3. Merchant delaying tactics::
   Under the Consumer Protection Act, 2017, e-commerce platforms are required to resolve disputes within 14 days, failing which they can file a complaint with theNational Consumer HelplineComplaints.

V. Risk control measures at the technical level

1. 🛡 RBI mandates all PG (Payment Gateways) deployments:

    if refund_amount > original_transaction.
   
        trigger_manual_review() # Anti-money laundering check
   
   

2. Platforms such as Razorpay/PayU use AI models to predict fraud risk, which may result in additional KYC steps for partial refunds.

To further optimise your payment system compliance, it is recommended that regular audits are carried out for compliance with the latest DPSS (Department of Payment and Settlement Systems) guidelines.