EMI and Pay Later Refunds
Initiate the process of Refunds for EMI transactions and Pay Later.
You can refund payments to customers who have used EMI methods, such as Debit Card EMI, Credit Card EMI, Cardless EMI and so on, offered by different banks that have partnered with Razorpay.
You can also process refunds to your customers who have made payments using the
option. Know more about the various .When your customer makes an online purchase using EMI methods on your website or app, the transaction amount is converted into Equated Monthly Instalments (EMIs). Following is the EMI payment flow from the customer to the merchant:
- Customer purchases for Total_Amt via EMI on your website or app.
- Bank pays Razorpay (Razorpay_Amt = Total_Amt - Bank Commission).
- Razorpay pays you (Merchant_Amt = Razorpay_Amt - Razorpay Commission).
Handy Tips
The EMI includes a portion of the principal outstanding and interest component, which your customer needs to pay every month until the full amount is paid.
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You receive a refund request from your customer.
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You will raise a Refund Request with Razorpay, indicating the amount to be refunded, which is ₹X.
Handy Tips
You can set the required payment terms and conditions.
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Razorpay then passes the Refund Request with the bank, indicating the amount to be refunded.
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The bank refunds the amount, Min (₹X, Total Principal paid).
- If ₹X = Total Principal Amount paid by the customer, it is a Full Refund.
- If ₹X < Total Principal Amount paid by the customer, it is a Partial Refund.
Handy Tips
- Your customer may be charged cancellation charges by the bank over and above the refund amount.
- The interest paid for EMI payments cannot be refunded.
If your customer purchases a product from your website or app using the Debit Card EMI option and raises a refund request, only a full refund request can be raised.
Debit Card EMI does not support multiple partial refunds as order information or product details are not sent to the bank processing the EMI payments. Razorpay team shares the reconciliation file with the bank, and the bank refunds the amount based on the calculations.
Handy Tips
- For DC EMI, only a full refund is allowed. A partial refund is not supported.
- The interest paid for EMI payments cannot be refunded and is directly managed by the issuing bank.
Examples - How refund is processed for Debit Cards EMIs
- A customer purchases 3 products - Product A, B and C, in a single payment using the Debit Card EMI option. The customer cancels Product A within 5 days of purchase and then cancels Product B on the 7th day. Here, a partial refund will not be supported as there are multiple items/orders, and Razorpay does not provide an order-level split up to the bank. A full refund request can be raised with the bank for all the 3 products.
- A customer purchases 2 products - Product A (₹2000) and Product B (₹7000). In a 3-month EMI plan, the customer needs to pay an EMI amount of ₹3100 (Total payment of ₹9300 in 3 months). After paying the first installment, the customer returns Product A. In this case, for a Debit Card EMI option, you cannot raise a partial refund request for ₹2000. You will have to raise a full refund request for the entire amount of ₹9000. The interest of ₹100 that the customer paid as part of the first EMI installment cannot be refunded.
Know more about
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You receive a refund request from your customer.
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You will raise a Refund Request with Razorpay, indicating the amount to be refunded.
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Razorpay passes the refund request details to the respective
, where the refund takes place before the Payback Period:- If it is a full refund, your customer’s loan is closed by the respective provider. They are no longer billed to repay this amount.
- If it is a partial refund, your customer is billed and will need to repay the balance amount to the Pay Later provider. Here, the refunded amount gets adjusted against the loan amount.
Handy Tips
- The refund will take place within 5-7 business days, depending on the provider’s processing time.
- Where the amount is repaid to the Pay Later provider, your customer gets a good credit limit (amount of credit available for use) with the refund amount. This balance amount can be used for subsequent payments.
Know more about
.Below is the list of refund timelines supported by cardless EMI and pay later providers.
For the EMI refund, a record is displayed in the customer's bank statement stating the Refund/Reversal amount for the payment towards EMI. The EMI amount refunded to your customer depends upon their bank based on the cancellation fee, processing fee, or any other bank charges.
If your customer cancels or returns an order purchased using the Credit Card or Debit Card EMI option, the entire purchase amount is immediately refunded to the customer's card. The EMI is also canceled at your (merchant) end. If the customer has paid any down-payment amount, it is refunded to the customer's card within 5-7 business days. The customers should contact their bank to confirm the EMI cancellation.
3. How will future EMI payments be affected in case there is a pending amount to be paid after a refund?
Suppose there is a balance amount to be paid by the customer. In that case, the remaining EMIs will be re-calculated basis the new principal amount, which is the Original amount, the refunded amount.
In order to close the loan, the customer has to pay the pending amount and only then it would be complete closure. However, this is a very rare case scenario. Refer to the following examples:
- A customer purchases 2 products - Product A and Product B. After paying a few EMIs, the customer decides to cancel the complete order. In this case, the customer needs to pay the full refund. The original loan booking amount will be debited in full and get adjusted against the full refund credit. The interest debits done earlier will be credited. However, the customer might need to follow up with the bank to ensure that the EMI transaction is canceled and that no more EMIs are debited.
- A customer purchases 2 products - Product A (₹2000) and Product B (₹7000). In a 3-month EMI plan, the customer needs to pay an EMI amount of ₹3100 (A total payment of ₹9300 in 3 months). After paying for a couple of monthly installments, the customer returns Product B. In this case, the customer will pay as per the regular EMI plan, that is, without affecting the EMI booking. The refund amount will reflect as a credit on the card. However, the interest already billed will not be reversed.
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