Indian tech

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.

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