NPCI’s (National Payment Corporation of India) UPI (Unified Payment Interface) has quickly become India’s widely accepted digital payment system as it offers a great amount of convenience and ease of use. Today, most of us can manage without cash in hand but not without UPI apps like GooglePay, Paytm, Phonepe, etc. But, if you thought that UPI was the fastest mode of payment, think again! Before the world even catches up with India’s unique payment mechanism, we are already hopping onto UPI Lite.
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To allow more space in the core banking systems, NPCI has now launched an ‘on-device’ wallet called UPI Lite. This offline system can be used for small-value transactions. Let’s take a closer look at this new payment mechanism.
What is UPI Lite?
UPI Lite is being introduced to make low-denomination transactions easier and faster. Close to 75% of the net volume of retail transactions across India are observed to be under Rs. 100 each. Also, close to half of UPI transactions are of value within Rs. 200 each. Thus, this feature is aimed at transactions of value under Rs. 200.
Initially, the app will only offer debit transactions, which means you can only send money using the app. In the future, the Phase-2 launch will allow credit transactions as well.
Read more: Will UPI be charged going forward?
How does UPI Lite work? Maximum limit for UPI Lite
UPI Lite is an ‘on-device wallet’. This means users must first add funds from their UPI or bank accounts to this app before starting off with any transactions. One can have a maximum of Rs. 2,000 to the UPI Lite app balance at any point.
Through this, users can make payments even in an offline mode. However, while adding funds to the balance, an internet connection will be required. This will allow transactions with a maximum value of Rs. 200 each.
In Aug 2023, RBI raised the maximum value for Lite transactions from Rs 200 to Rs 500.
What’s best for users is that they will not require a repetition of KYC if they already have an existing UPI ID.
Features of UPI Lite
Here are top features of UPI Lite:
- Faster transactions: UPI Lite enables faster transactions as it eliminates the need for users to download a UPI-enabled app. Users can simply use this feature on the Paytm app to initiate and complete transactions.
- Simple and user-friendly interface: This feature is designed to be user-friendly and easy to use, making it accessible to a wider range of users. It offers a simplified interface that allows users to send and receive money effortlessly.
- Compatibility with all banks: UPI Lite is compatible with all banks, which means that users can transfer funds from any bank account to any other bank account without any restrictions.
- No transaction fees: These transactions do not incur any transaction fees, making it a cost-effective way to transfer funds.
- High-security standards: UPI Lite transactions are secured with multi-factor authentication, ensuring that user data and transactions are protected. It also features a PIN-based authentication system for added security.
How to transfer funds from UPI to UPI Lite?
Anyone who wants to use UPI lite should have registered on the UPI app first. Any UPI user who can enable this option called “On-Device wallet” on the UPI app itself. After enabling, users can transfer funds from their bank account to the Lite version while ensuring a maximum balance of Rs. 2,000 at any point. Users will be able to add funds online using additional factor authentication (AFA) or through UPI AutoPay.
Currently, one can only make debit transactions using UPI lite balance offline. Credit transactions (including refunds) will be done online and directly to the user’s bank account.
How to set up ‘UPI Lite’ on BHIM App?
Here are the steps to set up UPI Lite on your BHIM app:
- Download and install the BHIM app on your smartphone.
- Tap on the ‘UPI’ icon on the home screen and select ‘Link your Bank Account’.
- Select your bank account and set a UPI PIN.
- Access the UPI Lite feature by tapping on ‘Scan & Pay’ and selecting ‘UPI Lite’.
- Enter the UPI ID of the recipient or scan the QR code to complete the transaction.
Overall, setting up ‘UPI Lite’ on your BHIM app is a quick and simple process that involves linking your bank account, setting up a PIN, and accessing the feature to initiate transactions.
Why is this feature being introduced?
UPI has fast gained prominence over some of the traditional payment systems like IMPS (Immediate Payment Service), NEFT (National Electronic Funds Transfer), and RTGS (Real Time Gross Settlement). So far in 2022, UPI clocked 30 billion transactions with a value of a whopping Rs. 51.74 trillion.
However, it has been observed that most of the UPI transactions are much smaller as compared to the other channels. Nearly three-fourths of UPI payments are of smaller values.
With higher rates of technical glitches and rejection rates on UPI, Lite is seen as an effective way of increasing efficiency and decluttering the payment gateway.
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How will UPI Lite help banks?
With reduced traffic on the digital banking system, there is expected to be better availability of CBS or Core Banking System to carry out big-ticket transactions, especially on NEFT and RTGS. Thus, this update will enable banks to efficiently process payments, of both big and small value.
Which banks will support UPI -Lite?
This feature initially took off with 8 banks supporting the feature, and 3 more banks were added later on. As of Aug 2023, a total of 11 banks support UPI Lite.
- Canara Bank,
- HDFC Bank,
- Indian Bank,
- Kotak Mahindra Bank,
- Punjab National Bank,
- State Bank of India
- Union Bank of India,
- Utkarsh Small Finance Bank
- Axis Bank
- Central Bank of India
- Paytm Payments Bank
Latest news- Introduction of UPI Lite X & Tap and Pay
Introduction of UPI Lite-X
With a vision to provide transaction facilities even in areas with poor internet connectivity, the RBI announced introduction of UPI Lite X which will allow users to send and receive money even when being offline. This is made possible by using Near Field Communication (NFC). This technology is also used when you tap and pay from your credit cards.
UPI Tap & Pay
UPI has also announced a Tap and Pay feature similar to Tap & Pay on credit cards. Through this feature a user can tap NFC-enabled QR codes at merchant/payee to make payments. This feature was introduced by RBI in Sep 2023.
UPI Conversational Payments
Through this feature, users are allowed to make payments and input UPI Pin through voice commands. This is intended to help those who find it challenging input figures on screen. To start with these features will be available in English and Hindi and will soon be available in other regional languages.
UPI payments facility is empowering India and Indians with faster and more efficient monetary transactions. Now, with the introduction of this update. it is slated to go a notch up, especially for small-value transactions. Both users and banks will benefit from the commencement of this feature on UPI platform.
UPI Lite feature is available for use on the BHIM app and 8 banks have gone live with this feature. Therefore, users of Bhim app who are already registered on UPI and have accounts with one of the 8 banks can begin using the UPI Lite feature.
To use this feature, you won’t need an internet connection since all debit transactions with the value of Rs. 200 each can be carried out in offline mode. For credits, into the account, however, you need to have an internet connection.
UPI Lite transactions will not be visible in the user’s bank account statement or UPI passbook. However, the app will send daily SMS on the history of transactions of the day.
No, just like UPI transactions, UPI Lite transactions will also not attract any charges.