The Dipavali festival is regarded as an occasion particularly associated with an ancient event of Sri Krishna overcoming the demoniacal force known as Narakasura, recorded in the Epics and Puranas. After the great victory over Narakasura in a battle which appears to have lasted for long, long days, Sri Krishna with his consort Satyabhama returned to his abode in Dwaraka. The residents of Dwaraka were very anxious about the delay caused in Sri Krishna's returning, and it is said that they were worshipping Bhagavati Lakshmi for the prosperity and welfare of everyone and the quick return of Bhagavan Sri Krishna and Satyabhama. After Sri Krishna returned, the story goes that he took a bath after applying oil over his body, to cleanse himself subsequent to the very hectic work he had to do in the war that ensued earlier. This oil bath connected with Sri Krishna's ritual is also one of the reasons for people necessarily remembering to take an oil bath on the day known as Naraka Chaturdasi, prior to the Amavasya when Lakshmi Puja is conducted. Everyone in India remembers to take an oil bath on Naraka Chaturdasi in memory of, in honour of, Bhagavan Sri Krishna's doing that after the demise of Narakasura. Having taken the bath, they all joined together in great delight in the grand worship of Maha Lakshmi for the general prosperity of everyone in Dwaraka. This is the traditional background, as is told to us, of the rites and the worships connected with Naraka Chaturdasi and Dipavali Amavasya.
There is a third aspect of it which is called Bali Padya, the day following Amavasya. It does not look that the Bali Padya festival is directly connected with Lakshmi Puja or Naraka Chaturdasi. But it has another background altogether – namely, the blessing Narayana, in His incarnation as Vamana, bestowed upon the demon-king Bali Chakravarti, whom He subdued when He took a Cosmic Form in the Yajnasala of Bali Chakravarti, the details of which we can read in the Srimad Bhagavata Mahapurana.
Bali Chakravarti was himself a great devotee, an ideal king and ruler, and having submitted himself to being thrown into the nether regions by the pressure of the foot of Narayana in the Cosmic Form, it appears he begged of Him to have some occasion to come up to the surface of the earth and then be recognised as a devotee of Bhagavan Narayana Himself. This recognition, this hallowed memory of Bali Chakravarti, is celebrated on the first day of the bright fortnight following the Amavasya. Bali Puja, Bali Padya are some of the terms used to designate this occasion, the day next to Amavasya.
So, the sum and substance of the message connected with Dipavali is that it is a three-day festival, beginning with Naraka Chaturdasi, a day prior to Amavasya; then the main Lakshmi worship day, which is Amavasya itself; and the third day is Bali Padya, connected with the honour bestowed upon Bali Chakravarti as a devotee of Bhagavan Narayana. It is also an occasion for spiritual exhilaration, a lighting up of all darkness, socially as well as personally, outwardly and inwardly, for the purpose of allowing an entry of the Supreme Light of God into the hearts of all people.
Dipavali means 'the line of lights'. 'Dipa' is light; and 'Avali' means line. So, Dipavali or the festival of the line of lights is the celebration of the rise of Knowledge. It is also the celebration of the victory of the Sattvic or divine elements in us over the Rajasic and Tamasic or baser elements which are the real Asuras, the Rakshasas, Narakasura and others. The whole world is within us. The whole cosmos can be found in a microscopic form in our own body. Rama-Ravana-Yuddha and Narakasura-Vadha, and all such Epic wars – everything is going on inside us. This Dipavali is thus also a psychological context, wherein we contemplate in our own selves the holy occasion of self-mastery, self-subjugation and self-abnegation leading to the rise of all spiritual virtues, which are regarded as lustre or radiance emanating from Self-Knowledge.
Bhagavati Mahalakshmi, the Goddess of prosperity, does not merely mean the Goddess of wealth in a material sense. Lakshmi does not mean only gold and silver. Lakshmi means prosperity in general, positive growth in the right direction, a rise into the higher stages of evolution. This is the advent of Lakshmi. Progress and prosperity are Lakshmi. In the Vishnu Purana we are told if Narayana is like the sun, Lakshmi is like the radiance of the sun. They are inseparable. Wherever Narayana is, there is Lakshmi. Wherever is divinity, there is prosperity. So on this day of Dipavali we worship the Supreme God who is the source of all conceivable virtues, goodness and prosperity, which is symbolised in illumination, lighting and worship in the form of Arati and a joyous attitude and feeling in every respect. So, in short, this is a day of rejoicing over the victory of Sattva over the lower Gunas, the victory of God Himself over the binding fetters of the soul.