UPI payment system is electronically transfer funds from one account to another like NEFT and IMPS. But unlike NEFT and IMPS you do not need to register them into your bank account before transferring money, therefore it can also use for online payments.
Working of UPI payment system
To use UPI system you need to create unique identification address just like email and associate it to any of your bank account. Customer or payee needs to have the same things and he will transfer the amount to your unique address and amount will be credited to bank account.
Places you can use and limit
UPI can be used for Merchant payments, remittances, bill payments among others. The transaction limit is 1 Lakh.