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Can someone help me understand what capital "L" literature is?

Okay, this is a dumb post. I know it is. And I also know that it has been asked here before, but I still need some help.

I keep trying to understand the distinctions between genre fiction and literary fiction. From what I understand, literary fiction is what is well-regarded within academia and wins the big prizes like the Pulitzer, Booker and the Nobel. Genre fiction is what sells better, connects more to the general masses and is more plot-driven, whereas literary fiction is more introspective and character-driven.

I used to think that a literary novel was just one with themes regarding the human condition and beautiful writing and could have any plot whatsoever. But it feels like I've read so many different definitions of what a literary novel is I have no idea. I've heard some say it is entirely introspective and should be a relatively small-scale conflict (so nothing like characters saving the world or the country). I've heard that literary fiction should be based in realism or, in some cases, can have elements of magical realism, but nothing like fantasy and science fiction. I've heard that it is something that should not have a complex plot. Or, it should be respected in academia, but is generally not liked by the general masses (???) because of the level of intellectualism. They also should not be bestsellers because that's considered upmarket (?????).

I definitely don't understand the not appealing to the masses part because aren't many classics still regarded because they were so popular and as a result built a cultural legacy within our societies? I could be wrong about that but I have heard Hemmingway was read by nearly everyone and Shakespeare was extremely popular among the masses.

I guess what I'm trying to ask is if Lord of the Rings or Harry Potter (I understand grouping these two does a disservice to the former) included incredible prose throughout their novels, would they be considered capital L literature? They certainly both have the cultural legacy and I would argue Lord of the Rings has rather poignant themes. I know Lord of the Rings has caused a lot of controversy among literary critics, but I'm not sure if its because of the writing or because fantasy or plot driven stories are inherently seen as non-literary.

I guess it just seems a shame to me that what is considered literary and thus worthy of acclaim by critics and awards seems to follow a rigid and a bit boring standard (which is weird because so many classics I've read have been the opposite of boring).

Do you think the plot of any novel could be considered literary if written well-enough? Has there even been a "protagonists save the world" well-regarded literary novel? Has there ever been an insane popular literary novel?

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