New RBI Guidelines for using Paypal

Just received an email from Paypal about changes coming to the account starting 1-Mar-2011

It is quite clear that the RBI wants all payments made to Indian Business Accounts via Paypal should be brought into banks in India, before they can be spent for export related expenses.

This is quite an interesting move as it will surely tighten the tracking of the flow of money – which has been quite difficult all these days.

After the confusion last year, we stopped using Paypal, but I guess it be worth giving it another chance to see if things have improved.

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

2 thoughts on “New RBI Guidelines for using Paypal

  1. Manish Diwan

    This is disgusting. This will kill the growth of young and raising entrepreneurs.

    Any good alternative?

  2. admin Post author

    Hi Manish,

    One option is to plan ahead of time and move away from Paypal. We did that long time back, after they refused to give us the Foreign Income Remittance Certificate (FIRC) which is required to get any tax deductions for payments received from outside India.

    We use Paypal only if we do not have any other option.

    Typically, we ask our clients to wire transfer it directly – though it does cost 40USD or so for each transfer. So we try to club our payments to make sure the wire transfer fees is much lesser than the paypal transaction fees.

    We are looking into other options, but do not want to give you any ideas that we have not experienced ourselves.

    Hope that helps.

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