Over the last few years, UPI has transformed digital transactions in India. From splitting bills to paying for every-day items, UPI has become the go-to payment method for many. As adoption increased more and more, the need for faster, low-value transactions led to the introduction of UPI Lite, a simplified version of the original system. How does it work differently from UPI? Let’s take a look at UPI and UPI Lite, how they work, and where each solution fits best.
| Table of Contents: |
| What is UPI? |
| How To Activate The UPI App? |
| What is UPI Lite? |
| How To Activate UPI Lite? |
| Difference Between UPI and UPI Lite |
| Which One Should You Use? |
| Bottomline |
What Is UPI?
UPI, or Unified Payments Interface, is a real-time payment system developed by the National Payments Corporation of India (NPCI) that lets you send or receive money using just a mobile app. With a UPI-enabled app, you can link multiple bank accounts to a single application. With UPI, you don’t need to enter bank account numbers or IFSC codes; a UPI ID, mobile number, or QR code is enough to complete a transaction.
How does UPI work?
In order to use UPI, you need a smartphone, a UPI-enabled app (like Paytm, PhonePe, or Google Pay), and a linked bank account. Once you set a UPI PIN, you can transfer money, pay bills, or make purchases directly from your account without logging into net banking. Many businesses also integrate UPI into their systems using a UPI payment gateway, allowing for fast and secure customer transactions through websites and apps.
UPI supports transfers up to ₹1 lakh per day. For certain categories like credit card payments or fees to educational and healthcare institutions, the limit can extend to ₹2 lakh or ₹5 lakh, depending on the nature of the transaction.
How To Activate The UPI App?
1. Download a UPI-enabled app like PhonePe, Paytm, Google Pay, or BHIM.
2. Register on the app using your mobile number which is linked to your bank account.
3. Choose your bank from the list. The app will automatically fetch your account details.
4. Set up a UPI PIN either independently or using your debit card details.
5. Once set, you can start making UPI payments using your UPI ID, mobile number, or by scanning a QR code.
What is UPI Lite?
UPI Lite is a simplified version of the UPI system. It is designed specifically for small-value transactions. How UPI Lite work? It acts as an on-device wallet where you can store up to ₹5,000 at a time. You can add up to ₹5000 to the wallet and spend a maximum of ₹1000 per transaction. Additionally, to ensure the wallet never goes empty, you can automate the top-up of your UPI Lite wallet. In case the wallet remains dormant for six months, any balance in the wallet will be transferred back to the linked bank account.
One of the major benefits of UPI Lite is the speed of payment. Since transactions are processed directly from your on-device balance, there’s no need to wait for bank validation or enter a PIN each time. This makes it a convenient option for payments at local shops, food stalls, or public transport. The funds are later settled in the background, and you can see a summary of all transactions via SMS or in the app.
The concept of UPI Lite is being further enhanced with the introduction of UPI Lite X. It is an extension of UPI Lite that enables offline transactions using NFC technology on supported Android devices. It allows users to send and receive payments up to ₹500 without an internet connection, making it useful in areas with poor or no network coverage. However, both sender and receiver must have UPI Lite X enabled for transactions to work.
How To Activate UPI Lite?
1. Open your UPI app (currently supported on Paytm, BHIM, and a few others).
2. Navigate to the UPI Lite option (usually found under ‘UPI services’ or ‘wallet’).
3. Select the bank account you want to link.
4. Add up to ₹5,000 from your linked bank account to create your UPI Lite balance.
5. Once set up, you can begin making quick, PIN-free transactions of up to ₹1000 each.
Difference Between UPI and UPI Lite:
| Feature | UPI | UPI Lite |
| What it is | A mobile-based, real-time system that allows fund transfers between bank accounts. | A simplified on-device wallet used for quick, small-value transactions. |
| How it works | Payments are made using UPI ID, QR codes, or mobile numbers through a UPI-enabled app. | Users add money into UPI Lite from a linked bank account and pay directly from it. |
| Transaction limit | ₹1 lakh per day (can go up to ₹5 lakh for specific categories); max 20 transactions/day. | ₹1000 per transaction, up to ₹5,000 daily. |
| PIN requirement | Requires a 4- or 6-digit UPI PIN for every transaction. | No PIN needed, making small payments quicker and more convenient. |
| Send/Receive | Allows both sending and receiving of funds between accounts. | Allows only sending of money; refunds or credits go back to the bank account. |
| Transaction history | Logged in the payment app and reflected in your bank statement. | Available within the app and summarized daily via SMS. |
| Bank and app support | Supported by over 300 banks and major apps like PhonePe, Paytm, Google Pay. | Currently available with select banks and apps, including Paytm and BHIM. |
Read more: Understand about UPI Lite Features & Benefits in more detail.
Which One Should You Use?
If you regularly make payments of small amounts throughout the day, like in cafeterias, local markets, or on public transport, UPI Lite offers a more efficient experience. You don’t need to enter your PIN each time, and payments go through quickly even when network strength is low.
On the other hand, UPI continues to be a better choice for larger payments, online shopping, and transactions that require direct bank validation. Since it allows real-time tracking of your account balance and higher limits, it’s better suited for a wider range of financial activities.
Bottomline:
Choosing between UPI and UPI Lite comes down to transaction needs and context. If you’re paying a merchant, transferring a large amount, or need access to multiple bank accounts, UPI provides flexibility with wide acceptance. On the other hand, for quick, low-value payments, especially in areas with patchy internet, UPI Lite offers a faster, PIN-free experience using on-device funds.
As both UPI and UPI Lite systems continue to evolve, understanding their roles helps you manage payments with more confidence, whether through a full-scale UPI payment gateway or for everyday offline purchases. Digital payments are only becoming more integrated into daily life, and knowing how to use UPI and UPI Lite effectively gives you greater control over your financial transactions.