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Paypal Restrictions for Indians from March 2011 – RBI Issue

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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.

About

My name is Amit Bhawani and here I like to share my internet/tech experience with my online readers. You can follow me on Twitter, Facebook & Instagram at @AmitBhawani I am also the Editor-in-Chief of PhoneRadar & Master Gadgets

Comments

  2. So, If not withdrawn from your paypal account in 7 days it will be sent back to sender right?
    @Rahul, This blog is updated daily.

  5. thanks Yogesh for clarifying all the Rules for PayPal India…Just need a official clarification of what happens after 7 days withdrawal limit goes off…

    I think there is a small typing mistake..”Users much link their Credit Card with their PayPal” much link or must link…

  6. that is really bad news, 7 days withdrawal time is very less,you will not be able to have repository now,you need to pay commission on every payment. what bout new be’s ….damn

  8. I think PayPal should make all Indian users sign a new agreement in which users will agree not to receive interests on keeping money for more than 7 days. If users have no problem I don’t see why RBI should have any.

    • Mayank

      The problem is not with RBI, the problem is with PayPal for not obeying the policies mentioned by RBI long ago. Its just the notice from RBI to PayPal to make more of money inflow/outflow. If Paypal gives interest for keeping money for 7 days or more then accordingly to 1999 & 2003 RBI guidelines that company should act as a bank and should give interest, which I think PayPal don’t want to make it (don’t want to act as bank).

      BTW
      Its countless loss for me since I have more than $100 in PayPal always and its interest :P??? its PayPal who is gaining all our interest.

      • Now ,if today some illitrate from reseved category sits on the seats of RBI and make a new rule ,what you will do?RBI sucks

        • How racist can you be! The RBI has put in rules to protect you! If paypal was like a bank they won’t be able to freeze your account without giving a reason, and you won’t be losing money since you can approach the authorities for help, But now if paypal freezes your account who will you complain to? RBI is trying to protect Indians, Paypal is the culprit who has been running away and trying to circumvent the rules.. Paypal acts like a Bank in Europe so why not in India? why not give interest on our money?! Get your facts rite before making arrogant remarks about India or Indian authorities who are trying to help you!

        • @Rahul,Ok ,They blocked payoneer also ,Does they need to be a bank also in india,Even Bangladesh type countries don’t have a problem with payoneer and almost more than 90 countries don’t have a problem with payoneer ,why they blocked payoneer also ,It sucks

  9. Got an update from PayPal to my question, here is what they said:

    My Question:
    In respect to the recent changes for PayPal users in India.
    Could you please let me know:

    #. If my client can pay me $1000 in two payments of $500 each per week?

    PayPal’s Reply:
    I understand that you want to know about the recent changes in PayPal’s
    Policy in India. Yes, the client can pay you $500.00 USD each per week.
    As long as the payment will not exceed $500.00 USD per transaction, then
    there should be no need to worry.

    So people, that is the reply I received from PayPal.

    That means you can arrange with your client to pay you $500 a week.

    Seems to be simple. But the other thing is that you cannot use the money to pay for anything online.
    This is not new as in South Africa, PayPal has this same restriction in place.

    You will have to apply for a credit card and use it to pay for any expenses you incur online.

    However, if you are a freelance like me, even though I transfer all my money to my bank, they are not going to so easily give you a credit card if you do not have a salary slip.:-(

    Anybody with any ideas how to work that out??

    • Yes, we can but the Online Debit Card Payments should be accepted the website and as you see most of the website accepts Paypal and Credit Card. Did you ever come across sites which accepts debit card payments? That of your choice of bank.

  11. This is a blow to all those Indians paying international bills online.
    It will hurt people who dont have credit card.

  14. Hi Amit,

    I would like to know what would happened to the money if they are not withdraw after 7 days they have arrived in our account?

  15. Thanks for clearing that up for me, I know it heartbreaking for the freelancers who is totally dependent on paypal for their livinghood but after doing some research I found out that it was Paypal who denied to follow rules of RBI, Those rules which are there to protect us. Anyways I don’t want to go into the depth.

  16. No one seems to notice another indirect LOSS we face now if we are purchasing international goods or services. We lose on the currency conversion charges both paypal and our bank will take.

    For example, when I drew $1 on current market rate of Rs.44.9497 paypal gave me Rs.43.5727.

    Then when I paid $1 from an Indian debit card, the bank charged Rs.46.4603.

    So, I ended up losing Rs.2.8876 for every USD I paid, which is about 6.5%.

    The rates are from live transactions done today. And, I know many banks charge higher currency conversion charges.

    I suppose the least RBI can do to alleviate some suffering is that they allow utilization of some % of export receipts to pay for services, sub-contractors etc. But do freelancers have a voice that can represent their issues?

    • Yes, Justin. Freelancers can make a voice. In fact revolution should be started. Very few has questioned on the topic discussed by you and in those very few has turned out write about that issue. Moreover PayPal conversion rate is always $1 (minimum) less than normal dollar to rupees rates, that’s a direct loss to the users. Moreover PayPal charges money to send from one account to another PayPal account. When its virtual money on the board, why would PayPal charge it for sending in Paypal to Paypal only.

  17. I dont like this side of the god damn INDIAN government. They have 11 lakh crore worth of black money all over the world… When some common man are trying to earn their livelihood out of working online, these illiterate bastards wont let them live with peace too… This is absolute shit and I hate every bit of it….

    Why is only INDIA giving problems to PAYPAL ?? They must be wanting some bribes….. the highly corrupt nation….
    I wish that all the officials involved with this decision may die an untimely and unpleasant death… their hand and feet rot and I curse them for all this !
    I am from a poor family.. try to make money from several small sites like blogs and other things… these bastards… they will make my money disappear.. they will steal my money… may they all rot in hell.

  18. I have a question: how the heck do I pay my affiliates? The affiliate program I’m using requires that I pay my affiliates using Paypal. Can I accomplish this if I linked my Credit Card with my Paypal account?

    Any help on this would be much appreciated. Thanks!

    • I have the same question. How do we pay our affiliates? Can we pay them using paypal if we have linked our credit card to our paypal account?

  19. why RBI is putting so many unnecessary restrictions thus blocking the development of internet business related to foreign countries???? are Indian officers still in the mindset, before the internet came???? why? why? why? gotta write to RBI head soon … with such kind of useless protectionism india will never come up in the global competition … too bad indian government policy

  20. hello all!
    i have lodged one complaint to the RBI head, regarding this RBI restrictions to Paypal & so to the Paypal users in India. Hope. some positive actions will be taken up sooner than later.

    i suggests you people who use Paypal from India to lodge more complaints to RBI by visiting the RBI website & do it at “contact us” menu option here: http://www.rbi.org.in/scripts/helpdesk.aspx

    the more people voice against these unwanted restrictions, RBI will do the positive actions sooner.

    let’s be united & bring positive changes in India & in the world.

    thanks.

  21. Why do we need interest? If I keep my $$ for a dollar value increase, its like currency investment, thats what RBI is after!!..

    Some points are made here and which are also valid, for services requires $ currency, a forced double conversion requires additional charges and that amount is not small!!!, this is one way TAX impose.

    In any business any expenditure towards growth is waived, all such transactions must be recorded in PayPal and RBI should accept that, its PayPal failure to provide such authentic information. How many ppl will be using paypal just for CC payments? I doubt that .

    I would blame both.

  22. Remember that per new Indian regulatory laws, you cannot keep balance in
    PayPal for more than 7 days. If there is balance without a bank
    registered, payments will be refunded automatically or disposed to
    Indian government at their own discretion.

    Find additional help and connect with other PayPal members in the PayPal
    Community Help Forum at http://www.paypal-community.com.

    Sincerely,
    Sonia
    PayPal

    • What is paypal doing to get its Indian customers out of this mess ?

      Paypal will not be so foolish as to refund the sales money and if they play with some ones hard earned money in the manner you suggest here as a representative of paypal- They would have to learn to live without Indian customers.

      It takes just a day to change the payment processing gateways on websites and alternative options exist…dont they ?

      • As a paypal representative you need to answer this question

        Why are only Paypal Customers being penalised for being with Paypal ?
        Why is it that proceesors like alertpay do not have this issue?

        • Is it true that Paypal acts like a Bank in Europe but is avoiding to do so in India?
          If thats the case – Paypal is the real culrpit and not Rbi as is being made to appear in all paypal correspondances?

  23. right now i am using alertpay they provide debit card payment to merchant,and you can also deposit money in to bank through link card ,paypal giving 7 days time to withdraw money then why you all worry it is enough time to withdraw, and $500/transaction you can again take $500 in next transaction,one con is you can’t use paypal money to buy goods,you must have credit card to buy or do business

  25. Rules made by, approved by and promulgated by a bunch of wastes of sperm.

    RBI is a bunch of motley fools – they cannot curb the big black money game – and to feel good coming out with such shit rules and fucking regulations.

    RBI bloody wants freelancers to bring in dollars to fill their bags – bastards – you need to spend money.

    And the 7 days transfer to account stuff is ridiculous – i have small amount of money pouring every day into my papypal account – so that means i sit down remitting it every day to live upto some rules made by bloody useless nerds.

    World wide web is a free market mechanism and when no other country has still interfered.. India pioneers in fooling around.

    Bastards cannot prevent big scams in bank – so they want to feel good that they are doing something atleast.

    These bastards will kill Indian freelancers.

    And it is so easy to fool arounf this rule – I just need to open and operate a fresh paypal account using an American or other country proxy. These bastards want us to waste time doing all these doaways.

    This is what happens when Fuckers get on these seats by passing some silly maths & english exams with no experinece of ground realitie.

    RBI – Rapist Bankers of India.

  26. I had send a paypal payment link to my client few months back and he made payment this week. The payment was more than $ 500. To my surprise it was accepted and I was also able to transfer it to my bank account. I am confused as to how come it was accepted as the transaction was more than $ 500. I have a business account in paypal. Does this rule do not apply to business accounts? Can anyone please throw some light on this. I am confused.

    • PayPal itself it confused of it policies. I haven’t withdrawn funds from PayPal and it has been now 15 days. As said it has to be withdrawn to banks within 7 days, but ?????

  27. I think that everything will be solved in a couple of months, and of course, I personally am looking for an alternative solution – better and flexible than PayPal.

  29. i tried to sent them email………motherfuckers ain’t got even contact form correct………showing spontaneous errors……..RBI site sucks…..

  30. Good evening,

    I have invested $105 in Forex Trading Account (avafx.com) by paypal. Now i made $157 profit by forex trading, totally i have $262 in my forex account. Now i want to withdraw by paypal. I want to know how to withdraw from paypal to my bank account, and which purpose code number i have to use & how to declare Tax for this earning.

    Please provide me procedure, Please Help me.

    Thankx

  31. Hello, is there any way that we can contact RBI and ask them to change their policy.

    1. Limit should exceed up to $2000
    2. RBI Should allow us to do shopping through paypal.

    Paypal make more profit while withdrawing funds in our bank. If you withdraw funds less than Rs.6999 it charge Rs 50 and if $ price is 45 it give 42.50. For eg if you have $500 in your account so value of $500 in INR is 22500 but Paypal give us INR 21250 Paypal is still earning INR 1250 on each transaction.

    This is not acceptable in any condition. If RBI allow to shop through paypal then we can save our this foreign exchange charges.

    Secondly, you can find alternative for paypal but you will not find customer who only opt paypal as their payment gateway.

    If you are satisfied with me kindly tell us how can we write a letter to RBI about changing some policies against paypal.

    Best wishes to All !!
    Good Luck -:)