UPI Lite to Allow Fund Withdrawals and Bank Transfers Soon

The National Payments Corporation of India (NPCI) has directed issuer banks, payment service provider (PSP) banks, and platforms offering UPI Lite to enable the ‘transfer out’ feature by March 31, 2025. This update will allow users to withdraw funds from their UPI Lite balance and transfer them to their bank accounts without disabling UPI Lite.

Understanding UPI Lite

UPI Lite is a simplified digital payment system designed for low-value transactions without requiring a UPI PIN. The service operates on the NPCI Common Library (CL) application, enabling quick transactions below ₹500. It is ideal for small payments like grocery shopping, transport fares, and quick service purchases.

However, up until now, UPI Lite worked one-way, meaning users could only add funds to their wallets but not withdraw them. To retrieve their balance, they had to disable their UPI Lite account, after which the remaining funds were transferred to their linked bank account.

Key Updates in UPI Lite

1. Introduction of 'Transfer Out' Feature

The biggest change is the transfer out functionality, which allows users to withdraw funds from their UPI Lite balance and return them to their linked bank accounts. Previously, users had to disable UPI Lite to access their remaining balance, but this new feature will offer seamless fund transfers without deactivating the service.

2. Enhanced Reconciliation Mechanism

To ensure smooth transactions and accurate record-keeping, NPCI has mandated that all Issuer Banks operating on UPI Lite must maintain a Lite Reference Number (LRN) level balance. This means every transaction will be properly logged, and banks must reconcile daily with NPCI data to ensure financial accuracy.

3. Strengthened Security Measures

To enhance security, UPI apps with active UPI Lite must now implement app passcodes, biometric authentication, or pattern-based locks at login. This extra layer of security aims to prevent unauthorized access and improve user trust in digital transactions.

NPCI’s Compliance Deadline for UPI Lite Updates

NPCI has set a March 31, 2025 deadline for all banks and payment platforms to fully implement the new UPI Lite features. While the new modifications will be rolled out, the existing guidelines for UPI Lite will remain unchanged, ensuring a smooth transition for users.

How to Enable UPI Lite on Your Device

Activating UPI Lite on your mobile banking app is a simple process:

1. Open Your UPI App – Launch your preferred UPI-enabled banking or payment app.

2. Find UPI Lite Option – On the home screen, look for the “Enable UPI Lite” feature and tap on it.

3. Accept Terms & Conditions – Read and agree to the terms and conditions to proceed.

4. Enter the Amount – Specify the amount you want to add to your UPI Lite balance.

5. Select Linked Bank Account – Choose the bank account from which funds will be deducted.

6. Authenticate the Setup – Enter your UPI PIN to authorize and complete the setup.

7. Start Using UPI Lite – Once activated, you can make instant small transactions without needing a UPI PIN.

Benefits of the New UPI Lite Features

The introduction of the withdrawal option and improved security measures makes UPI Lite even more convenient for digital transactions. Some benefits include:

• Seamless fund access – Users can withdraw their UPI Lite balance anytime without deactivating the service.

• Faster transactions – No need to enter a UPI PIN for small payments.

• Better security – App passcodes and biometric authentication enhance protection.

• Improved transaction tracking – Daily reconciliation ensures financial accuracy.

• Wider adoption – More banks and users are expected to benefit from this feature.

Final Thoughts

The transfer out feature in UPI Lite is a game-changer for users who rely on the platform for small transactions. With the ability to withdraw funds without deactivating UPI Lite, users will have greater control over their money. NPCI's move to strengthen security and improve reconciliation will also enhance trust in digital payments.

As banks and payment service providers implement these changes by March 31, 2025, users can expect a smoother and more secure UPI Lite experience.