PayPal halts in India again

Yesterday got email from paypal:

Subject: Change in Withdrawal of Funds from PayPal Accounts for India Users

	PayPal Home

Dear XXX XXXX, 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

Indian users of online money transfer service PayPal face a long wait after the firm abruptly suspended personal payments because of regulatory issues.

According to BBC News:  Last month's move followed questions from the Reserve Bank of India (RBI) about whether PayPal complies with laws on cross-border money transfers.

Neither PayPal, which is based in the US, nor the RBI was able to say when the issue might be resolved.

The affair has left many Indian users of PayPal frustrated.

'Fast-growing market'

PayPal says in its blog that its personal payment service for India would be suspended "for at least a few months".

The company could not give figures for the size of its business in India, which is believed to be relatively small. However, PayPal spokesman Anuj Nayar told the BBC that India was a "fast-growing market".

The problem is over the Payment and Settlement Systems Act, which came into effect in India in August 2008.

The RBI says that under this act, any money transfer scheme has to be authorised by the Indian authorities, which PayPal is not.

The RBI would not give details of its discussions with PayPal, but says it has sent the company some questions to respond to. Government sources in India have said they believe PayPal was aware of the implications the change of legislation would have for its business.

The stumbling block is whether PayPal personal payments - as opposed to commercial transactions - amount to cash remittances. PayPal says it only operates online and it is up to users to get money from their PayPal account to a bank account to encash it.

Some Indian PayPal users are small businesses for whom the system is a quick and effective way to transfer funds.

Angry posts on social networking sites have complained about money being lost because of transaction fees, and of not being able to transfer funds to local banks once the PayPal service was suspended.

PayPal has pledged to sort out these problems and some PayPal users seemed to blame Indian bureaucracy as much as anything else. "Always wonder why regulators in India are keen on blocking stuff," commented one Twitter user.

Paypal will refund US$5 cheque withdrawal fee for Indian users read more

Category: India, News, Paypal, RBI