UPI Transaction Failed? Here’s What Your Bank Must Do

Ever been in that frustrating situation where you’ve sent money via UPI, your account is debited, but the payment never reaches its destination? You’re not alone. While UPI has become India’s go-to for digital payments, failed transactions can still happen. The good news? You’re protected.

Banks have a clear legal responsibility to resolve failed transactions and compensate you for delays, all thanks to a regulatory framework set by the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI).

What is a Failed Transaction?

A failed transaction is one that isn’t fully completed for reasons not caused by the customer. This includes technical glitches like communication failures, time-outs, or system errors that prevent funds from being credited. The framework ensures that even if a transaction fails, the customer isn’t left in the dark.

Why Do UPI Transaction Failures Happen?

While NPCI provides the infrastructure, the actual transactions are processed by banks (remitter and beneficiary banks). Failures usually occur due to:

• Technical glitches in banks’ servers or NPCI switches
• Connectivity issues between remitter and beneficiary banks
• Downtime in bank systems or merchant servers
• Exceeding transaction limits or incorrect UPI PIN

In all such cases, the responsibility of banks is clearly defined by RBI circulars and NPCI procedural guidelines.

Are Banks Liable if a UPI Transaction Fails?

Yes. According to RBI’s circulars on payment systems and NPCI’s UPI procedural guidelines, banks are responsible for resolving failed transactions. If money has been deducted but not credited, the remitter bank (the bank from which the amount is debited) has the primary responsibility to ensure reversal or settlement.

The beneficiary bank (the bank where money was supposed to be credited) also has a role in providing real-time confirmation of success or failure to avoid delays.

Key Responsibilities for Banks

The RBI’s framework is built on the principle of a Turn Around Time (TAT). This is the maximum time a bank has to resolve a failed transaction. The core idea is that if your account is debited, but the money doesn’t reach the beneficiary, the bank must reverse the transaction within a set period.

For Unified Payments Interface (UPI) transactions, there are two main scenarios:

1. Account Debited but Beneficiary Not Credited (Fund Transfer)

In this common scenario, your account is debited, but the person you’re paying never receives the money.

• Bank’s Responsibility: The beneficiary’s bank is responsible for automatically reversing the transaction. This auto-reversal must be completed no later than T + 1 day (T being the day of the transaction).
• Compensation: If the bank fails to reverse the transaction within this TAT, it’s liable to pay a compensation of ₹100 per day for every day of delay beyond T + 1 day. This compensation is to be credited to the customer’s account automatically, without them needing to file a complaint.

2. Account Debited but Merchant Not Credited (Merchant Payment)

This happens when you make a UPI payment to a merchant, your account is debited, but the merchant doesn’t get a payment confirmation.

• Bank’s Responsibility: The system is required to initiate an auto-reversal within T + 5 days.
• Compensation: If the auto-reversal is delayed beyond T + 5 days, the bank must pay a compensation of ₹100 per day for the delay.

(These duties are the bank responsibilities in failed UPI payments as defined in the circular.)

What to Do If the Bank Fails to Comply?

If a bank fails to resolve a failed transaction within the specified TAT and doesn’t pay the compensation, you can escalate the issue. You can register a complaint with the Reserve Bank – Integrated Ombudsman Scheme, 2021. This independent body investigates customer complaints and provides a structured mechanism for dispute resolution, ensuring that banks are held accountable.

 Or

NPCI and the Grievance Redressal Mechanism

NPCI provides the core infrastructure for UPI, but the participating banks (the remitter and beneficiary banks) are responsible for the actual processing and resolution of failed transactions. NPCI’s role is to provide a structured escalation path if the banks fail to comply.

According to the NPCI’s official Dispute Redressal Mechanism, the process for a customer is tiered:

1. First Level: The customer must first raise a complaint with their bank or the Third-Party App Provider (TPAP), like Paytm, if the transaction was made through their app.
2. Second Level: If the complaint remains unresolved, the customer can escalate it to the respective bank.
3. Third Level: If the bank also fails to resolve the issue, the customer can approach NPCI as the final level of escalation before involving the regulator.

This is a structured process to ensure that most complaints are resolved at the bank level, reserving the NPCI channel for more complex or persistent issues. For more details on the dispute mechanism, refer to the NPCI website

What Responsibility Banks Have for Failed UPI Payments?

Banks have clear duties to ensure that customers’ money is protected:

• Monitoring Transactions: If a UPI payment fails, banks must detect the failure in real time.
• Auto-Reversal of Funds: If money is deducted but not received, banks must reverse the amount within the prescribed timeline.
• Communication: Banks should notify customers through SMS, email, or app alerts about the status of the failed transaction.
• Grievance Redressal: If the reversal doesn’t happen, banks must provide a complaint mechanism via customer care, online portals, or banking ombudsman.

Harmonisation of Turn Around Time (TAT) and customer compensation for failed transactions using authorised Payment Systems

Your Rights as a Customer: What You Can Demand from Banks

Immediate Rights

1. Automatic Reversal You don’t need to request reversal—banks must process it automatically within prescribed timelines.

2. Compensation for Delays If banks exceed TAT limits, you’re automatically entitled to ₹100 per day compensation.

3. No Documentation Requirements Banks cannot demand extensive documentation for genuine failed transaction reversals.

4. Priority Resolution Failed transaction complaints should receive priority treatment over regular banking queries.

Escalation Rights

1. Banking Ombudsman If banks don’t resolve issues within TAT, you can approach the RBI Integrated Ombudsman Scheme (https://cms.rbi.org.in/).

2. Consumer Courts: For significant delays or non-compliance, consumer court remedies remain available.

3. RBI Complaints: Direct complaints to RBI’s customer service portal for systemic issues.

What Reduces Bank Liability: Customer Negligence Factors

While banks bear primary responsibility for failed UPI transactions, certain customer actions can reduce bank liability:

Customer Actions That Limit Bank Responsibility

1. Late Reporting

• Reporting failed transactions beyond reasonable timeframes
• Not monitoring account statements regularly

2. Sharing Sensitive Information

• Sharing UTP PIN, OTP, or login credentials
• Falling victim to phishing attempts

3. Technical Negligence

• Using outdated apps or operating systems
• Ignoring security warnings during transactions

4. Disputed Transactions

• Claiming failures for successful transactions
• Providing false information during complaint resolution

How to Ensure Banks Meet Their Responsibilities

Immediate Actions After Failed UPI Transaction

1. Document Everything

• Screenshot transaction details
• Note exact time and date
• Save payment references

2. Check Account Statement

• Verify debit in bank statement
• Monitor for automatic reversal
• Track compensation credits

3. Contact Bank Proactively

• Report through official channels
• Reference RBI guidelines
• Demand written timelines