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.


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… 🙁