Silent Executioner & Hesitant Player: RBI – Paypal India Issue

The RBI – Pay pal issue has been discussed at length since their notification on Jan 2011, or perhaps, should I say since Feb 2010. However, here is a short recap.

• Feb 2010 Paypal suspends personal payments & local bank transfers to Indian users
• July 2010 Paypal enables electronic transfer of funds, Export code is an absolute necessity to complete the transfer.
• Jan 2011: Paypal disallows purchase of goods & services from available paypal-balance, and forces withdrwal within 7 days of remittance of funds; remittance not to be greater than 500$

Paypal claims that RBI regulations have forced them to make such a management decision, while RBI implies that Paypal is not complying with the rules and regulations needed to conduct business in India. However, the problem is, there seems to be no “official word” from RBI’s spokesperson in this matter. Never mind, we have money matters of concern here.
So, according to the latest Paypal Notice on Jan 2011

1. Any remittance to paypal account should be withdrawn within 7 days of remittance.
2. Indian users cannot accept payment for more than 500$
3. Indian users cannot use existing paypal balance to pay for goods & services
4. All payments should be routed through CCard > Paypal

This has raised two vital questions amongst the Indian paypal community.

1. What will happen to my funds if I don’t withdraw within 7 days?
2. Paypal withdrawal page clearly mentions that any withdrawal less than 7000/- will incur an additional service charge of 50/-

After repeated messages through “Contact us” @ Paypal, finally they have responded to my (our) queries. Here, I copy paste my queries and Paypal’s response

	Sometimes, I receive as little as 5 $. It would be impossible to withdraw this amount given your service charge & conversion rate. WHAT WILL HAPPEN TO MY FUNDS IF I DONOT WITHDRAW TO MY BANK ACCOUNT IN 7 DAYS?
	Hello, my name is Joanna Marie from PayPal Customer Service. To ensure full compliance with the RBI and all applicable India regulations, we will be monitoring accounts closely as we expect our PayPal members registered in India to withdraw their funds within 7 days from the date the payment is received. If funds are not withdrawn within the said timeframe, we may take appropriate actions such as limiting account features.
	I donot understand. I have a verified paypal account. What limitations am I looking at? Will my (non-withdrawn) funds be still be available at a later date when i get a reasonable amount for withdrawal ?
	Hello, my name is Joe Marie from PayPal Customer Services. ……. If you will not transfer the funds on the given time frame, our system will automatically transfer the funds to your bank account. If your balance is less than $10.00 USD (minimum withdrawal amount), our system will not be able to automatically transfer the funds to your bank account. Therefore, you will need to wait until your balance is enough or more than the minimum withdrawal amount before you can transfer them to your bank account. ………

	The withdrawal section of paypal page says that, Paypal charges a 50Rs fee on all withdrawals, where the final withdrawal amount is less than 7000 Rs. So, given the min 10$ , roughly 10 * 42 = 420 Rs. (.. lets assume the exchange rate is 1$ = 42 Rs for this calculation) Does that mean, I will be receiving only 420 – 50 = 370 Rupees only ?
	Hello, my name is Ric from PayPal Customer Service. …. In order to comply with RBI, we will be waiving all fees on withdrawals. Even if you will be transferring funds lower than 50.00 INR, rest assured that you will not incur any withdrawal fees. ….
	There is no mention of this on the website, or anywhere else. IS IT TRUE THAT THERE WILL BE BE NO “WITHDRWAL FEE” @ PAYPAL EVEN IF THE FINAL WITHDRAWAL AMOUNT IS LESS THAN FIFTY RUPEES. Sorry for the caps, but I have to ask for your confirmation again on this.
	Hello, my name is Arnold from PayPal Customer Service. The previous representative, Ric, is right. Let me confirm to you that there will be no more withdrawal fee when you transfer funds to your bank account. This is regardless of the amount.
	Can u please direct me to the paypal’s page where these information is available to the public. I have been searching for over a 4 weeks, and did not find the above information in paypal page.
	Hello. My name is Paolo from PayPal Customer Service. Just in case that you have questions please don’t hesitate to ask us through the contact us link at the bottom of the page.

I am not sure whether to breathe a sigh of relief, or wait with bated breath what their next “critical notice” would contain. The fact that, this waiver of fee is not a public info raises some serious red flags in my mind. But then, it might be just me & my paranoia.
For those who are interested to know more,

• RBI notification @ RBI website.
  • RBI letter of Nov. 2010 under reference:-
  • Para :- 2.(ii) – USD 500 stipulation
  • 2.(vi) – 7 days stipulation.
• RBI gets it wrong again– discussion@Nasscom Emerge community
• SaaS vendors – how are you collecting payments? – discussion@Nasscom Emerge community

I am sure that other freelance forums are filled with rants and accusations against RBI as a knee-jerk reaction towards this notice ( A simple google search will give you more rants to read). At the same time, we also have arguments stating that Paypal has been violating RBI rules/ FEMA , and the latest notification is an attempt to wriggle their way out of complying with RBI guidelines.
Indian paypal user’s PAN card is lined to Paypal. There is practically no exchange of hard-cash. This should be proof enough to “trace” any transaction back to user.
That said, Do I have my own set of rants against Paypal & RBI ? Yes, I do.

1. @Paypal: For every forced withdrawal, I am going to lose terribly on exchange rates. It is not secret that Paypal exchange rates are rip -off
2. @Paypal: For every payment I make via my CC > Paypal; I incur additional service charge & also suffer the horrible exchange rate twice Earlier, when we make payment from paypal balance, the service fee is zero.
3. @RBI : Is it so hard to issue an official response to the online-work-force who procure and deliver work via the internet?
4. @RBI : Give us a date for public meting, we will be there personally with our queries. Help us understand your decision, try us, we (freelancers, SMBs) are far more sensible than you guys give us credit for.

PS: I am aware that, I am very seriously violating RBI’s “rules” @ their Disclaimer page
Yet, I am left with no choice. If the guys @ RBI can chart out regulations on online payment gateways; then, I guess you can very well understand why these two rules are just impossible to follow. “Or, do you need me to explain explicitly to you”?

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