Paypal is an online payment processing e-commerce business. It is the faster, safer way to send money, make an online payment, receive money or set up a merchant account. All you need is an email address, if you have one, you can send money to that email address !

Off late, Paypal and RBI have had a few issues and the latter had given instructions to Paypal to modify the way it functions in India. According to the new regulations set by RBI, the changes in Paypal are as follows:

An Indian resident Paypal user cannot receive more than $500 in one transaction : I have not idea what you are supposed to tell your clients, especially those who make automated payments from their credit / debit cards, paypal balance. Imagine if you’ve done business worth $5000, your client will have to sent ten installments of $500 :). How smooth and easy can that get.

An Indian resident Paypal user MUST have a credit card / debit card if he/she wants to make international payments : If you are a small time freelancer, who is making a living from online activities, then god save you ! It’s a mammoth task for any body, who’s not in a 9 to 5 job to get a credit card. Of course you can apply for a Debit card, but the uphinge one has to go through to get hold of Debit card makes the whole experience a sour one.

An Indian resident Paypal user cannot send money to another Indian resident Paypal user : If put it simple words, Indian paypal users cannot make any domestic payments ! You try doing that and you get this message:

We notice that you are attempting to pay an Indian resident user. The payment you initiated has been blocked. PayPal only facilitates international payments and cannot be used for domestic payments within India. We suggest you find alternative methods to complete the payment. If you believe that the person you attempted to pay is not based in India, please contact PayPal customer support.

Which means, you can’t send money to your near and dear ones from paypal. You can’t pay your hosting bills if you have rented it from a local host. You can’t pay a fellow Indian freelancer for the work done for you.

The natural outcome of the above to steps is that, users will have to withdraw the amount to their Indian banks linked to their respective Paypal account. To any common man who is not associated with Paypal, the whole issue may seem to be very simple. A Paypal user has to withdraw money to Indian Bank account, and make payments using credit / debit card. But we still haven’t discussed about the actual problem when it comes to Forex transaction, which is, Exchange Rates !

The following figures will give you a better idea about what I’m trying to tell :

1 USD as per todays exchange rate (according to is : 44.2458298 Indian rupees.

As per todays rates, if you withdraw funds by electronic transfer to your bank account, then PayPal exchange rate is : 1 USD = 42.9780 INR


If you want to make any international payment, PayPal’s exchange rate as of 06-Apr-2011: 1 Indian Rupee = 0.0217883 US Dollars, which means every 1 USD will cost you 45.636 INR.

A customer will, forcefully, lose 3 INR for every Dollar he withdraws and uses the same to make international payment via Paypal!

The Faceless Freelancers in India can be called the ‘Educated, Unorganized Sector’. Silently, this sector has been contributing a huge chunk of revenue, which has bettered the lives of thousands of people who have been working from the comfort of their homes. This sector is also responsible to provide jobs to thousands of educated people, and there by is combating un-employment problems. With such restrictive policies it only worsens the state of all those who depend on online activities for their livelihood, and in turn affects the GDP too !

There are a few loopholes which RBI is concerned off. But extreme policies like this is not a solution. Instead of making things worse for a whole lot, Government should probably come up with policies to plug the loopholes.


  1. I am completed all my tasks , but now the sites says ” To receive payments as per Indian regulations, please complete your tasks”?
    i added 2 banks, credit cards, email verification, purpose code, pan card .
    In my task board i see all the tasks are marked “complete” with a green tick.
    i have contacted the customer care but no luck.
    How to i solve this?

  2. yes but for that you want to connect with paypal only and make sure

    need to open paypal account and add you card there so make payment is easy to you

  3. I tried making a payment of approx. 370 US dollars to someone in the US. I signed in as a ‘guest’ (‘guest’ and ‘paypal account holder’ options were given)as i do not have a Paypal account. I used four different cards (including mine, my friend and family members). Each time it was rejected. But I was charged Rs.50 twice for using my card twice! I wrote to them..neither have they resolved the issue(it’s been a month) nor have they refunded my money. Incidentally I had made two payments of 50 US Dollars each just two weeks and a month prior to that to another person signed in as a guest! what’s wrong?

  4. I’m owner of a website and it’s growing $500/pm but i’m in big trouble because of Indian PayPal need credit card to do most things….

  5. @CVH – Yes, Indians cannot use Masspay option any more. Also, I don’t think RBI sucks, but they have to avoid such restrictive trade policies.

  6. @Raman – I’d not say RBI is illiterate. There are two problems which RBI is trying to address:

    1> Illegal money laundering possibilities. With paypal being unaccounted, a lot of money can flow across the borders without anybody knowing about it at all. Imagine the string of problems it can create. What if it is used for anti-national activities. Money can be funded for illegal activities and to create internal disturbance, it can finance armed rebellion within the border. With the number of anti-national elements increasing (it’ll be more appropriate to say- with more people being brain washed against out mother land), our enemy states can use Paypal’s loose front to fund unwanted activities with in the border.

    2> Tax evasion : Honestly, how many of us pay tax for what we earn online. Without getting into whether the tax we pay is being put under just usage, the fact remains that most who work online get away with taxes because it’s not accounted for. It may seem small if you are earning a few $$ – $$$ / month, but a lot of small IT / SEO / Web marketing companies make $,$$$ – $$,$$$ every month and then too get away without paying tax.

    I agree this move by RBI is stringent. GOI and RBI along with Paypal can work out a better mechanism to bring such elements under their clutches. However my take is, RBI has taken these steps in short term and will definitely come up with a better plan. The only question is how quickly will they come up with a better solution and even bigger question that haunts me is – what happens if the government changes ? The process will not be set in very quickly, and it’s a long suffering for those who have been using Paypal in a legal and just way !

    My 2 cents 🙂

  7. Today,

    finally,PayPal seems to have blocked sending money,am getting error to link credit card/debit card though am verified with bank.This can’t get any worse now,we are gone for good,PayPal and Indian RBI,both sucks.

  8. I didn’t know about this recent problems with Paypal lately for Indian users and I’m trying to find a better payment solution for my site to address users in India. Thanks for sharing.


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