14 DAY TRIAL // After almost a year of problems, PayPal has come to an agreement with the India authorities that will enable it to continue to operate in the country, albeit in a very restricted way. The Reserve Bank of India (RBI) has imposed some limitations to what users can do with their PayPal accounts in India.
The move was aimed at cutting down on tax evasion via PayPal, though it will likely hinder the ability of small businesses in the country to compete in the global market.
Come March 1st, 2011, several limitations will be imposed on PayPal transactions and accounts in India.
The biggest, for Indian users, is that they will not be able to use PayPal funds they may have received from transactions for other payments. All money coming into a PayPal account has to be transferred to a bank account within seven days.
What's more, any payment made has to come from your bank account and will only be processed by PayPal, you can't store funds with the payments service.
Another limitation is an upward cap on transaction values. Specifically, you can't receive payments worth more than $500, per transaction, with PayPal. This will affect small businesses offering services or products for export.
"We have received a notification from the Reserve Bank of India (RBI) outlining the new requirements for governing the processing and settlement of export-related receipts facilitated by online payment gateways," PayPal's Dickson Seow wrote.
"In order to comply with the RBI guidelines, our user agreement in India will be amended," he continued.
PayPal's first problems in India arose a year ago when all transactions were blocked for a period of time. This came after the RBI complained that PayPal didn't comply with newer rules and regulations in the country. PayPal was able to resume operations in India later on, with some changes, but it seems that the RBI has finalized a set of rules that apply to online payments services.