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PayPal Hammers Indians With Stiffer Policy Amendments, Thanks To RBI

In depth details about recently amended PayPal policies for Indians and alternatives to PayPal.

If you belong to India and use PayPal for International transactions, here’s some news that’s sure to disappoint you.

Just couple of hours back, PayPal has dispatched emails to all its Indian customers[official post here], alerting users regarding some major(stirring) policy changes that PayPal will bring into action starting March 1, in order to comply with RBI guidelines.

This is how the email reads further…

Our user agreement in India will be amended for the following services as follows:

  1. Any balance in and all future payments into your PayPal account may not be used to buy goods or services and must be transferred to your bank account in India within 7 days from the receipt of confirmation from the buyer in respect of the goods or services; and
  2. Export-related payments for goods and services into your PayPal account may not exceed US$500 per transaction.

In simpler words, it all comes down to this…

  1. Indians won’t be allowed to keep their money in PayPal accounts for more than 7 days
  2. Indians won’t be allowed to spend PayPal money for buying product/services online
  3. Indians won’t be allowed to receive more than $500 per transaction

Such hiccups with PayPal India aren’t new. Last year, PayPal restricted personal payments for Indians, halted Electronic fund transfer for Indians due to RBI scrutiny and then made it mandatory for every Indian to associate his/her PAN Number with PayPal account.

And now, we have another PayPal policy changes in place. How would these amendments affect PayPal users from India, who will be affected the most and is there any way out ? Let’s find out…

To whom it will affect the most

  • Online merchants
  • Technology freelancers(developers,designers etc)
  • Bloggers and online content writers
  • Small-medium size web dev companies

How would this affect PayPal users from India

  • Online merchants, freelancers(technology/content), bloggers etc who charge their clients with money exceeding $500 per transaction are going to have plenty of issues. Most international clients are far comfortable with PayPal and such restrictions on Indian service providers may cause repulsive behavior and annoyance among International clients while dealing with Indians.
  • Indians will have to bear worst currency conversion rates. Those Indians who use PayPal regularly are well acquainted with abnormally low currency conversion rates (Dollar to Rupee), while transferring money from PayPal to local bank accounts. In order to comply with new rules, Indians will be forced to withdraw their money within 7 days, no matter how poorly the currency conversion rates at that point are.
  • PayPal money will remain unusable for Indians who pay their recurring web expenses(ex. monthly web hosting charges) and purchase goods and services with PayPal money. That will add more inconvenience to Indians, if there weren’t enough already. Only way to pay through PayPal will have to go through Credit Card companies.

Is there any way out ?

Unfortunately, there isn’t. Indians have got no good option but PayPal for instant & convenient International transactions.

PayPal is by far the most popular and widely accepted way of doing online transactions and Indians (if not the entire world) have slowly grown used to it by now. ‘Wire transfer’ is one alternative but most clients still prefer paying through PayPal only. Moneybookers is another alternative that Indians can try out but their identify verification policies are too complex and again, if your client/buyer doesn’t have a Moneybookers account(which is most likely the case), this option won’t work out at all. (In case you know an equally better alternative to PayPal, do share that in comments)

Who’s fault is this…

Actually, there isn’t much fault of PayPal here. It’s all because of RBI scrutiny and what RBI has imposed on PayPal to stay operational in India. PayPal has amended its policy for Indian users to strictly comply with RBI guidelines, nothing for its own sake.

While one can still understand why RBI decided to impose a ‘7 day limit for money withdrawal’ and ‘restriction of online expenses using PayPal money’ (to curb misuse of PayPal for tax evasion etc), there appears no valid reason why ‘No more than $500 per transaction’ rule has been imposed.

So that’s all about it but don’t be surprised if one fine day, you get another bad news from PayPal, notifying Indians about more extreme policy changes than these amendments.



  1. Nitesh Pathak

    January 28, 2011 at 8:29 pm

    What the Fu*k is that !

    Huh !

    Now its the time to find our alternate option in the place of PayPal.

    RBI Sucks………….

  2. Pingback: Tweets that mention PayPal Hammers Indians With Stiffer Policy Amendments, Thanks To RBI | TechPluto --

  3. Pawan

    January 28, 2011 at 9:11 pm

    This is surely bad news!

  4. Prashant Sharma

    January 28, 2011 at 9:17 pm

    @Pawan It certainly is…

  5. Ankit Poddar

    January 28, 2011 at 9:21 pm

    It is an unfortunate development for small time professional content writers like myself. For a long time, I have not been able to afford a card for online payments and paypal was the best option available. It is safe and allows me to do dollar transactions in dollars, avoiding any loss in conversion. Alas, RBI wouldn’t allow me the same.

    However, I have got a question. What happens to the money I have in the account already? Will I have to make the transfer from 7 days on getting the mail from paypal? Please shed any light, if possible.

    • Prashant Sharma

      January 28, 2011 at 9:29 pm

      @Ankit PayPal policy amendments are going to implement from March 1, 2011 so right now, whatever money you’ve got in your PayPal account is safe and can be kept in the PayPal account up to next 1 month(until March 1 arrives)…But to be on the safer side, make sure you take all your money out of your account before March 1

  6. Vinod Gill

    January 29, 2011 at 12:22 am

    I dont think there is any other option because your client a/c must also be their on the same site in which you are going to make your a/c

    You can try alertpay

    • Prashant Sharma

      January 29, 2011 at 1:11 am

      @Vinod AlertPay doesn’t facilitate direct bank transfer and Check via postal mail in India(which sometimes never ever reaches its destination) is a big no-no for many. That leaves people with very narrow options of withdrawing money from AlertPay.

      Also, most of the International clients are not acquainted with AlertPay and nobody likes experimenting with newer online transaction services bcoz scams are already in abundance and people prefer to stick with trusted names like PayPal. Also, no Indian service provider/freelancer would like to push his clients to pay through ‘AlertPay’ or any new service as that can completely turn the deal off.

  7. phobia

    January 29, 2011 at 2:30 am

    all i can say is this.What the hell is wrong???with rbi and paypal?7 days is total crap.ROT IN HELL

  8. cal

    January 29, 2011 at 2:41 am

    It is really a bad news to all of us who are dependent on paypal for our online activities. It really pains somewhere which cant be said openly. RBI imposes all such rules on small and medium entrepreneurs who are doing so much of hard work to earn few cents but not those so called people who keep hide their money somewhere out of the country.

    Lastly I did not understand why the author of this article is so happy and conveying his thanks to RBI.

    God only should save Indian webpreneur

    • Prashant Sharma

      January 29, 2011 at 4:08 am

      @Cal My “thanks” is a satirical remark on RBI…I am no way happy with this….

  9. Akash

    January 29, 2011 at 4:38 am

    RBI rules sucks.

    RBI has no logical authority to restrict PayPal users.

    RBI should realise the naked fact that by using PayPal (for withdrawl/recieve) PayPal users are helping POOR RBI to income Dollers.

    RBI really sucks and is going to hell.

  10. Navin

    January 29, 2011 at 9:30 am

    Its a bad news for every Blogger who used to use PayPal for their transactions. I do not think some other service could relpace it PayPal’s security is unmatchable. I know its not PayPal’s mistake but our own jealousy RBI officers!

  11. Ashish

    January 29, 2011 at 9:32 am

    Hey, if we all of freelancers write to RBI about our issues, may be they think to change the policy. what you think guys, please get the contact of RBI officers and we will write e-mail or lettter. please update my suggestion.


  12. Pal

    January 29, 2011 at 10:34 am

    RBI or Indian government will be harsh only on small/medium business or individuals. But it won’t bother about the bulk sum smuggled out of the country and stashed in safe places. This is the reason this government is safeguarding the Swiss bank account black-money holders. They don’t wish to release their names or take any action. God save India from these so called leaders/rulers.

  13. vinit pratap singh

    January 29, 2011 at 10:44 am

    RBI SUCKS, bad news! FOR all of us.

  14. fashionmixture

    January 29, 2011 at 12:58 pm

    totally change the policy.

  15. Pingback: paypal in india close to dead « Blogger pundit

  16. Kevin

    January 30, 2011 at 6:17 am

    The entire government is f***ing corrupt. To cover up the expenses of the rich we have to bear the brunt.


    If anyone here can find a way or eradicating them from the face of this planet, we have to live with this crap.

    Its useless telling them anything as they are a bunch of illiterates who ONLY want bribes.

  17. Prakash

    February 1, 2011 at 10:16 am

    Well, this was expected from PayPal. And I am not even sure if RBI is going to stop here….It might get worse than this….

  18. Pingback: Paypal in india close to dead « My Tech Blog

  19. samrat

    February 8, 2011 at 11:11 pm

    Just because RBI can’t stop the big defaulters who siphon off billions to Swiss bank accounts it reacts by taxing the small time guys earning to the tune of 100-500$ for the services they offer.

  20. prakash c

    February 9, 2011 at 1:15 pm

    RBI people do not know importance of paypal on online business, it is not possible to run a online business without paypal, let RBI official try to do online business without paypal or let them try the business with their latest guidelines, it is not possible to do online business with their latest comic guidelines

  21. saif

    February 11, 2011 at 1:52 am

    will this be afftected for working in online ptc sites?

  22. Shahid

    February 20, 2011 at 11:54 am

    Hmmmmmm dis z a shockng news – evry online seller asking paymnt through paypal only dats y i applied for ma credit card( only for paypal ) – nw wt 2 do – z der any anther option bro 2 snd money like china,honkong,canada- becz in india we cnt deposit money in western union also – plz bro’s help me na tel me z der any another way 2 snd money 2 doz countries –

  23. ainbabu2011

    February 26, 2011 at 12:13 am

    We can find informations regarding Paypal alternatives in India at paypalalternatives

  24. Rajeev

    March 27, 2011 at 7:29 am

    This is the reason YOU WILL NEVER SEE A GOOGLE or a FACEBOOK – coming out of India.

    RBI, Govt., Politicians, Bureaucrats – Do Nothing about Massive Swiss Bank Accounts – But jump in to stop small time developers, budding entrepreneurs from earning money !!

    Jokers of the Highest Order.

  25. rohan

    October 13, 2012 at 3:25 am

    Hey guys, try MEMBERCHIMP.COM is an independent portal that takes care of all of your e-commerce needs. It is different because it has simple UI with absolutely no setup costs and there are no monthly fees.There are no long installations and it cuts across boundaries of nations, accepting payments from across the globe.We provide online payment solutions even for Pakistan.We support all the payment options including Paypal, Payza, Moneybookers & Credit/Debit Cards. Users can make the payment and thereby adding that amount to your MemberChimp account.One can redeem it by Paypal, Cheque or a Bank transfer without any hassles.It is the easiest payment solution for every business.

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