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Friday, March 4, 2011

Paypal Restrictions for Indians from March 2011 – RBI Issue


PaypalFor many blogger’s and Freelancer PayPal have been an amazing helping hand to them to make their payment, funds transfer to Indian Banks, receive payment online, send funds to friends, payment of due bills and lot more activities. PayPal especially in India has a bigger name as many of people who live here don’t have a Credit Card and they relay on PayPal. There are over 0.2 millions users who have active PayPal account in India alone.
But as soon as March 1, 2011 arrives PayPal will again restrict Indian users with certain limitations and when you carefully look at the guidelines provided to them by RBI, it would be hard-hitting to you.

PayPal has already given a 30 days advance notice to the users in India about the new user agreement for Indian’s. According to PayPal those restrictions are levied as they should comply with Reserve Bank of India (RBI) guidelines under the rule of processing and settlement of export related goods and supplies through online payment processors.
With effect from March 1, 2011 any user of PayPal either premium or personal or business account holder will require to comply with the requirements like -
1. You can’t use your PayPal to make payments to any online goods or services that you purchase online. Also the balance that you have in your account should be transferred to your bank account within 7 days from the receipt of the payment from the buyer.
2. Export related payments for good and services into your PayPal account may not exceed US $500 per transaction.
So its clear that PayPal will not stop payment to any purchase that you do like paying your hosting fees, payment of your domain name, renewals and payment to eBay good and services, payment to freelancers and lot more. They should look for a better alternative of making online payment. More to add to this we have PayPal asking users to withdraw their funds from PayPal within 7 days from the receipt as PayPal is not a bank, it’s just a payment processor and it shouldn’t have users payment for a longer period of time.
This is not the first time when we have seen PayPal limiting access to the Indian users, they have previously stopped personal payment and lately they have introduced the purpose code while making a bank withdrawal.
More precisely if you talk on this issue why this limitations have come from and what actually is the scene going on behind, etc., etc.,. we have few basic FAQ’s which can clear all your doubts
Is there any limit on how much funds I receive through a transaction?
Starting from March 1, 2011 PayPal customers in India can’t receive more than $500 per transaction for any export related good and services. These rules are mandated by RBI guidelines and PayPal should follow that. According to RBI policies on this, all the payment above $500 which comes to India through online gateways has to be reported to official government and RBI, but noticing this PayPal is circumnavigating by imposing these rules and so limiting users so that they shouldn’t take any tension of again involving with Indian government.
Why is 7 days withdrawal limit set?
According to the RBI rules of 1999 and 2004, any online gateways which keeps your balance for 7 days should provide interest to the users and must be regulated as a bank and it looks like PayPal wants to be limited to payment processor but not go with a banking solution.
Can we make online payments for shopping that we do?
Unfortunately PayPal will not allow customers in India to payment the online shopping payment, payment to friends, hosting funds payment, domains renewal charges or any other payment starting from 1 March, 2011. Users must link their Credit Card with their PayPal and then you can send money using your Credit Card.
So would PayPal be able to provide quick solution to this?
As far as I know, as the rules says, its highly unlikely that PayPal will lift this ban on Indian users. But sending funds and making online payment should soon have an alternative options.
So when you closely look into those FAQ’s its looks like PayPal who is skipping all the guidelines mentioned by RBI. Maybe RBI has notified PayPal about the rules of doing a business in India and PayPal is now notifying us with this rules because rules in RBI are build many years back and PayPal in India is still a child.

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