Paypal India Does it again!

  Paypal India users, get ready for a ridiculous setback. Starting from March 1,2011 Paypal India is introducing a bunch of new rules regulated by the RBI, making the Firm similar to a bank rather than a free flowing online transaction system. Here is what we can find in the New rules :

"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:
  • 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 
  • 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. 
                  
Sincerely,
The PayPal Team"


Paypal has also introduced a FAQ , which quotes the following.
Frequently Asked Questions:


Q: Why will PayPal not allow me to receive more than US$500?
  Starting 1 March, 2011, PayPal customers in India will not be allowed to receive payments for any export-related goods or services for an amount exceeding US$500 per transaction. This change is to ensure that we continue to comply with the RBI Guidelines.


Q: Why will PayPal not allow me to keep money in my PayPal balance?
  Starting 1 March, 2011, PayPal customers in India will not be able to keep money in their PayPal account balance. Instead, all money received into a PayPal account must be transferred to a customer's India bank account within 7 days from the receipt of confirmation from the buyer in respect of the good or services. This change is to ensure that we continue to comply with the RBI Guidelines.


Q: Will my customers be able to complete their checkout with their PayPal account balance?
  We're glad that you offer PayPal to your customers. Unfortunately, we will not allow customers in India to send money from their PayPal account balance starting 1 March, 2011. This means that your customers will need to link a credit card to their account in before sending you money with PayPal. This change is to ensure that we continue to comply with the RBI Guidelines.


Q: The customers on my website are not able to complete purchase or pay via PayPal. Why?
  Starting 1 March, 2011, PayPal customers in India will not be allowed to receive payments for any export-related goods or services for an amount exceeding US$500 per transaction. If you are listing products greater than US$500 per transaction then you may need to seek alternative methods of payment. This change is to ensure that we continue to comply with the RBI Guidelines.


Q: What is meant by receipt of confirmation from the buyer in respect of goods and services?
  As an exporter of products or services abroad, you need to ensure that your buyer has received the product or services as per specifications set out on your website. As an exporter of goods, you may withdraw the balance to your bank account in India upon reasonable consideration of shipping time and other clearances such as excise and customs for the destination country. As an exporter of services, you may withdraw the balance to your bank account in India upon receipt of payment from your buyer into your PayPal account.


 So why is Paypal doing this? Lots of explanations around, but here is the best one out - "Any entity which provides on-demand payments have to be regulated as a bank as per RBI rules, this is mandated because if they hold money for more than 7 days they have to provide users with interest." So Paypal is out to be earning for what they do, and there are some other tax issues to be dealt by the RBI as well. So in short, Millions of youth in India who use Paypal for Online Transaction are going to be in dilemma, Internet is not going to be as it was in the future - and these steps cuts short the hype that "Internet is a free world"