Yes, PayPal is at it… again. Over the past few years, I’ve found PayPal to be a convenient mode of payment, so it’s somewhat frustrating to keep getting these updates with regard to compliance with RBI policies. This mail I received last night was another bolt from the blue; 

Dear Atul Karmarkar,

As part of our commitment to provide a high level of customer service, we would like to give you a 30-day advance notice on changes to our user agreement for India.

With effect from 1 March 2011, you are required to comply with the requirements set out in the notification of the Reserve Bank of India governing the processing and settlement of export-related receipts facilitated by online payment gateways (“RBI Guidelines”).

In order to comply with the RBI Guidelines, 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.

We seek your understanding as we continue to employ our best efforts to comply with the RBI Guidelines in a timely manner.

We regret any inconvenience caused to you and hope the advance notice will enable you to plan your future use of our services accordingly. For further information, click here.

If you have any questions, please contact PayPal customer support by logging into your PayPal account and clicking on ‘contact us’ at the bottom of the page. We sincerely thank you for your patience and continued support.

Sincerely,

The PayPal Team

Now the size of my PayPal transactions isn’t really all that large, but a restriction of accepting payments upto $500 per transaction into your PayPal account does seem somewhat unfair, especially for all the SMBs, entrepreneurs, bloggers and freelancers out there.

On the basis of what I’ve seen and heard so far, it seems ‘keeping’ the money with them for more than 7 days is likely to get PayPal regulated as a bank (as per RBI norms), which obviously they don’t want. Secondly, transactions exceeding $500 have to be reported to the RBI and Govt, so they’re neatly side-stepping this requirement also.

Sigh.. time to look at some alternatives I guess…

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Effective April ’10, they increased the Average Quarterly Balance (AQB) to be maintained from Rs.5,000 to Rs.10,000, which didn’t make any sense as they weren’t offering anything special to warrant this increase.  Possibly they were playing catch up with others like Citibank (Rs.25,000/month) or ICICI Bank (Rs.10,000/quarter).

Recently, I received my bank account statement and was surprised to see a debit towards issue of additional cheque book in the first quarter of the year. I use cheques quite a lot to make payments for utility bills, credit cards et al and 25 cheque leaves for 90 days is just not enough. Transferring via National Electronic Funds Transfer (NEFT) is possible, but there is again a service charge involved. If they’re trying to reduce paperwork caused by cheques, then why charge for using NEFT?

The biggest sore point however is that for some reason, payment gateways like Billdesk just don’t accept HDFC Netbanking as a valid payment option anymore. In cases like Airtel, the option doesn’t exist and for others like BSNL, Vodafone and other service providers, there is an option for HDFC Netbanking but when you select it, you get a popup like this…

Considering HDFC Bank is my main bank, this is quite inconvenient as I’m now forced to make online payments by credit card. The increase of AQB and service charges for second cheque book have been a disappointment too.

Their SMS Alerts also seem to have gone for a toss. I invested some money (> their alert limit of Rs.5,000) in a mutual fund 3-4 days ago. The amount has been debited from my account but I’ve yet to receive an SMS confirmation. Salary has been credited to the account today afternoon but it’s close to midnight now and the SMS alert is yet to arrive with the good news.

Their phonebanking sucks big time and it takes ages for someone to respond. When they do, they end up asking you to reconfirm your details even if you’ve validated your T-Pin. Their phonebanking officers aren’t available 24X7, and even complaints / requests for a callback go unheeded now.

Their staff seems clueless about what documents are needed in case of an address change. The phonebanking officer gave one answer, an officer at one branch gave a different answer, and another at a different branch yet another answer. Quite stupid really.. like a body where one arm doesn’t seem to know what the other is doing!

I’ve had bad experiences with ICICI Bank and ABN Amro Bank but so far I never had any problems with HDFC Bank in all these years. I’m also an HDFC Bank shareholder, and a very happy one at that, but these recent experiences have taken some sheen off that gloss, and I’ll have to reconsider using them as my main bank.

 What’s your story?

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Some months ago, PayPal customers in India were suddenly caught unawares by changes in PayPal’s policies regarding payments and withdrawal of funds. Those problems however, were resolved and things seemed back to normal. Around 3-4 days ago, I received an email from PayPal as below;

Dear Atul Karmarkar,
In accordance with regulatory instructions, we would like to notify you about a change in our withdrawal functionality in India starting on August 1, 2010. At present you can request for either an electronic or cheque withdrawal of funds from your PayPal account if you are an India user.
From July 29, 2010 onwards, you will only be able to request for a cheque withdrawal of funds from your PayPal account.
While we are working hard to restore the electronic withdrawal service, in the meantime, we are bringing this matter to your attention so that you can plan your future withdrawal activities accordingly.
To request for a cheque withdrawal:
Log into your PayPal account, click on ‘Withdraw’.
Click on the ‘Request a cheque from PayPal’ link.
Enter the withdrawal amount and select your mailing address, then click ‘Continue’.
Click ‘Submit’ to confirm your request.
In order to help you with this change and until further notice, we will refund the $5 USD cheque withdrawal fee to you for cheque withdrawals made on July 29, 2010 onwards.
For any questions, please log into your PayPal account and click ‘Contact Us’ at the bottom of the page.
We apologise for any inconvenience caused from this change in our withdrawal functionality. We will provide ongoing updates to you here. We thank you for your attention and patience as we work tirelessly to resolve this situation as quickly as possible.

Thank you,
The PayPal Asia Team

Just when I was thinking here we go again, PayPal sent another mail earlier in the day, this time full of joy and happiness, stating;

Dear Atul Karmarkar,
We’ve received good news. You can continue to enjoy electronic withdrawals just as you did before.
While we have received your appreciation for the advanced notice and the refund of the cheque processing fee, we also have heard loud and clear that you highly value the ease-of-use of our electronic withdrawal service. Our customers are our number one priority and we are working tirelessly to improve our service.
Thank you for your patience and in appreciation for your continued support, we will still provide the $5 USD processing fee refund for any cheque withdrawals made from July 29, 2010 until further notice.
For any enquiries, please contact PayPal customer support by logging into your PayPal account and clicking on ‘contact us’ at the bottom of the page.

Thank you,
The PayPal Asia Team

No doubt this is a relief, but PayPal seriously needs to sit with the Indian authorities and sort out all these payment + withdrawal related issues once and for all, before account holders stop using their PayPal accounts purely due to such uncertainty or worse, start looking for alternatives.

Related Posts:

• Roasting in PayPal and RBI Hell… Again!
• Respite for PayPal customers in India
• PayPal nukes users in India
• HDFC Netbanking now with Secure Access
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From now on, when you want to withdraw funds from your PayPal account, you need to fill in a new field called ‘Purpose Code’, as explained by Farhad Irani on the PayPal blog. This is intended to help the RBI determine the nature of cross border transactions and it is likely that you may need to provide copies of receipts and invoices as and when required.

Related Posts:

• Roasting in PayPal and RBI Hell… Again!
• PayPal payments to Indian customers
• PayPal nukes users in India
• HDFC Netbanking now with Secure Access
• RIP Steve Jobs

This is affecting only India based users and all payments to and from India are being reversed / suspended. Customers can make payments to India but Indian merchants cannot withdraw funds in INR to local banks.

Here’s what Anuj from the communications team at PayPal had to say about this problem, which admittedly isn’t all that much!

Hope this is resolved quickly as a lot of transactions are now being conducted using PayPal, especially by Indians who are still wary about punching in their credit card details online.

Related Posts:

• Roasting in PayPal and RBI Hell… Again!
• PayPal payments to Indian customers
• Respite for PayPal customers in India
• HDFC Netbanking now with Secure Access
• RIP Steve Jobs