Online money payment gateways like PayPal is a great boon to freelancers and export/import business people, not just in India but for people across the globe. Having a PayPal account is just like owning an online bank account which spans across the nation boundaries. It gives freedom to pay and get paid from/to most parts in this globe. But, in a bid to tackle black money and money laundering, online payment gateways are under a great scrutiny in India. The biggest lose is PayPal India, which has a descent operations in India.
As per the latest RBI guidelines, starting March 1st,
1. You’ll not be allowed to receive online payments that exceed $500 per transaction. If the transaction exceeds $500, you got to arrange for other modes of payments like bank wire-in transfer and others.
2. You will not be able to buy any goods/services using your PayPal account money.
3. You won’t be able to retain any balance in your PayPal account for more than a week. You got to transfer it to your local bank account within 7 days of money deposit.
4. If you have to make payments via PayPal to someone, the money should first be transferred to PayPal using your bank’s account (debit/credit).
Why RBI is strict on PayPal ?
If you look at RBI’s perspective, all guidelines above totally make sense. Because, a PayPal account doesn’t come under any Indian bank guidelines and is totally operated online. Mean, all the PayPal transactions are totally away from Income tax scanners and thus an easy way for people to evade taxes. Though users of these online payment gateways like PayPal are suppose to report their online earnings in their tax returns, but who does in reality ? All these might have prompted RBI to enforce stricter rules.
Whats the future for PayPal India ?
Starting March 1st 2011, PayPal will turn out to be a “Dummy”pal, literally. I don’t see any value add from PayPal india account after all these RBI restrictions. PayPal will just act like a proxy to your bank account and is going to be one more added level to receive/send money. People can rather use bank wire-in transfer method to save time and also get better currency conversion rates (PayPal eats lot of money in the name of currency conversions).
In the name of taming black money, RBI has just placed a bigger roadblock for all online payment gateway services with its latest guidelines. I see the rules totally not timed well. Lots of internet focussed companies have just started coming up in India and the eCommerce trend has just started picking up big time. Blocking PayPal like services at this time might be little setback for the indian eCommerce growth curve. Lets wait and watch how PayPal is responding back to keep its operations afloat in this highly potential indian market.