@mitu I checked out those points you recommended and they all seem fine. Im going to seem like total idiot now.. Everything else was fine but I just had to update the retropie setup. Then I updated the emulator again. I updated everything not too long time ago so I had no idea it could be that. I even uninstalled and re-installed the psx emulator and updated it before doing this. Now im wiser and can potentially help some other people in the future.
I really appreciate your help, it pushed me to right direction.