Refunds

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sequenceDiagram
    box Merchant
        participant Merchant
    end
    box PayU
        participant PayU
    end
    box Bank
        participant Bank
    end

    Merchant->>PayU: cancel_refund_transaction
    Note over PayU: Queued

    PayU->>PayU: Debit settlement funds
    PayU->>Bank: Refund initiated

    Note over Bank: Bank API call
    Note over Bank: Up to 3 retries

    Bank->>Bank: Process refund

    alt API success
        Bank-->>PayU: Success
        PayU-->>Merchant: Update ARN
    else API failure
        Bank-->>PayU: Failure
        PayU->>PayU: Send offline to bank
        Note over PayU,Bank: 5th attempt<br/>TAT 5-7 days
        alt Manual success
            PayU-->>Merchant: Update ARN
        else Manual failure
            PayU-->>Merchant: Failure status
            Merchant->>Merchant: Re-initiate refund
        end
    end

    loop Poll status
        Merchant->>PayU: check_action_status_txn_id
        PayU-->>Merchant: Status response
    end

The refunds workflow in PayU typically follows this sequence:

1. Customer requests a refund — A refund begins when the customer cancels an order, returns an item, or did not receive the expected service after being charged.
2. Merchant initiates refund request — Initiate via PayU Dashboard or Refund Transaction API.
3. PayU validates refund request — PayU checks transaction existence, refund conditions, and full or partial amount rules.
4. PayU sends refund request to the payment partner — PayU forwards the request to the bank, card network, wallet, or lender.
5. Bank processes the refund — Funds are returned to the customer's source account.
6. Settlement adjustments — The refund amount is deducted from the merchant settlement balance.
7. Customer receives the refund — Typically 5–21 days depending on payment method; PayU emails the merchant on completion.
8. Poll status — Use Check Refund Status APIs or Webhooks for Refunds to track progress.

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Automatic retries: If the refund API call fails at the bank end, the bank retries up to three times automatically. If it still fails, PayU requests the refund manually with the bank.

Refunds can be classified into two types:

• Partial refund — The refund amount is less than the payment amount (for example, customer returns one item from a multi-item order).
• Full refund — The refund amount equals the full payment amount (entire order cancelled or returned).

For step-by-step API integration, refer to Refund APIs and Refund Transaction API.

When a customer is making a payment and the transaction was not successful (status is "Pending" or "Dropped"), but the amount was debited due to unforeseen circumstances, the bank sends the amount to PayU. After reconciliation finds the transaction was not successful, PayU automatically initiates the refund to the customer.

For example, if a customer tries to book a movie ticket and the transaction fails but the amount was debited, PayU initiates the refund automatically after reconciliation.

📘

Contact PayU Key Account Manager to enable automatic refunds: If you wish to enable the automatic refund feature, contact your PayU Key Account Manager or PayU Support.

When is a customer eligible for a refund?

If a customer has been charged for a transaction and did not receive the expected services, they may be eligible for a refund. For example, if the customer was charged for a movie ticket but did not receive the ticket.

Prerequisites for initiating a refund

• The customer must have made the payment within the allowed time frame or using a supported PayU product.
• You have the transaction ID, date, and transaction amount.

Refunds must be sent to the source account used for payment. PayU passes the refund request to the bank or lender through which the payment was made.

Refunds typically take 5–21 days to reflect in the customer's bank account. For Net Banking transactions, certain government banks may take longer. PayU communicates the status (successful or failed) over email once the refund request is processed.

For instant refunds on eligible transactions, refer to Partner Refunds.

A chargeback is raised by the customer to the issuing bank (for example, fraud, unsatisfactory delivery). A refund is initiated by the merchant after the customer requests a refund or a transaction has failed for the customer.

For chargeback management, refer to the Chargeback section of the PayU Developer Guide.