PayPal takes Strict measures to Comply with RBI Guidelines

Written by: Muninder

Updated: January, 29, 2011

Yes, the PayPal drama is back, but again this time RBI is the so called Culprit. Entrepreneurs, Freelancers & Bloggers do need PayPal for receiving & sending funds. Today morning I got a mail from PayPal stating a change in their User Agreement for India.
The changes will be effective from the 1st of March, 2011. The saddest part is that Indian Users can’t use PayPal to buy Goods/Services.
PayPal India Comply RBI Guidelines
This means that from now on you can’t use your PayPal Account balance to pay your Hosting bills. You need to transfer some money from your Credit Card (CC) to PayPal and then use that money to buy stuffs online.
Now many maybe having this Question for sure. Why ?? You certainly have the right to raise this question as it’s your hard earned money which is in your PayPal Account. But seeing from a different perspective I feel that PayPal cannot be blamed solely. It’s just that PayPal officials are following the Guidelines issued by the Reserve Bank of India (RBI).
Coming to the second change that Indian PayPal users will have to deal with. Suppose that you are an Entrepreneur & you work on a client’s project. Both of you are from different countries.
So the only option he has is to transfer the money online using an Online Gateway like PayPal. Assuming that the payment you’ll be receiving from the client is above 500$. From 1st March onwards your client will not be able to transfer the money to you as a whole, as the Maximum money you can receive in your PayPal account has been limited to 500$. So he’ll need to split that amount into parts, each lesser than 500$ and then send it to you.
Below is a Quote from the mail I received from PayPal today morning,

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.

The first change is quite understandable as it has tax issues related to it. But the second change is quite out of mind.
Do you think this drastic step taken by PayPal will change the entire Online Business Scenario ??


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