PayPal India stops withdrawals, reverse payments

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PayPal has suspended payments to and from India as well as blocking transfers to local banks. Customers with withdrawals in progress are reporting that these have been stopped and the money returned to PayPal. A post on its official blog says:

personal payments to and from India and transfers to local banks in India have been suspended while we work with our business partners and other stakeholders to address questions they have about the service. During this time, customers can still make commercial payments to India but merchants cannot withdraw funds in Rupees to local Indian banks.

In addition (though not mentioned in the official communiqué), PayPal has apparently reversed all personal payments made to Indian accounts between 1st and 5th February. Payments for services too are being reversed, though an email sent out from PayPal support says that if payments were made for goods, they should be made again using the “Goods” tab and providing a shipping address, and they will be honoured.

Some users are speculating that this is being done by PayPal to stop fee-free personal payments – though PayPal’s own statement suggests it’s something more legalistic than that. More information if we get it.

20 Responses

  1. This is pretty bad news for the thousands of Indian PayPal users that do contract work. Not so much concerned about the blocking of “personal payments”, as I can live with paid for transactions that give PayPal fees.

    It’s the “No withdraws to bank accounts” that would be a killer, that would be no income until they sort it out as I can hardly pay the mortgage with PayPal! 🙄

    Just hope it never happens in the UK 😯

  2. Are they basically holding onto people’s money with no real way for them to withdraw it? Sounds illegal to me.

  3. It’s earlier than February 1st. According to Associated Press (U.S.):

    PayPal halts certain payment transactions in India
    “Nayar said the suspensions began Jan. 28.”

    With no resolution after a week and a half, guess that’s what PayPal (Anuj Nayar) meant by “resolve the situation as quickly as possible.” Will this national hold take 21 days to resolve? 🙄

    Anyone wondering about the ‘noise’ from India can sample this selection of comments .

    Incidentally there is very little news of this in the U.S. It’s mainly showing up in the news from the rest of the planet.


    “What’s In Your Wallet?”
    Capital One

  4. I transferred 1000 usd to my account but now after reversal it has reduced to 926 usd, so paypal has charged me 1USD = 48.353578871, can you believe it? Rate is around 45

  5. Ok. Maybe the 21 day hold was not a joke.

    PayPal’s India transaction block could last months
    AP: “Online payments service PayPal says its suspension of certain transactions in India could last months.”

    The PayPal Blog
    Anuj Nayar: “Personal payments to and from India will be suspended for at least a few months until we fully resolve the questions from the Indian regulators.”

    Appears to be the dread 90 day hold ……


    “Sock it to me?”
    Richard Nixon, Laugh In, 18 September 1968

  6. This is related to Personal payments sent to Indian Paypal account holders – of which MANY are freelance programmers, and they have abused the ‘Personal Payment’ option by having payments sent to them as Personal (to save fees) and not for a Service, where they would pay fees.

  7. India’s Central Bank Stops Some PayPal Services

    ““Providers of cross-border money transfer service need prior authorization from the Reserve Bank under the Payment and Settlement Systems Act,” a spokeswoman for the Reserve Bank of India, Alpana Killawalla, said in an e-mailed response to questions. “PayPal does not have our authorization.”

    The act, adopted in August 2008, regulates payment and settlement methods in India.”

    “It took PayPal which is owned by eBay in San Jose, Calif., more than a week to notify customers after being flagged by Indian regulators. The Reserve Bank of India said it asked the company on Jan. 27 to immediately suspend PayPal payments to and from India as well as transfers to local banks in India. PayPal said it complied with the request the next day.”


    “What exactly is the difference between pretending to cooperate and actually cooperating?”
    Dr. Gregory House, House

  8. They revered my early transferred back to my PayPal account and not sure weather to initiate the new withdrawal again or not.

    Pay pal support requested to wait till the mail from them

  9. Apparently PayPal had a very long time to be compliant.

    From a friend.

    Payment and Settlement Systems Act, and Regulations come into effect
    01 Sep 2008

    India Says PayPal Not Authorized for Money Transfer
    John Ribeiro, IDG News Service
    Feb 11, 2010 7:30 am

    “PayPal needs authorization to operate a cross-border money transfer service, under the country’s Payment and Settlement Systems Act, Alpana Killawala, spokeswoman of the Reserve Bank of India (RBI), said Thursday.”

    “The Payment and Settlement Systems Act of 2007 stipulates that no person other than the RBI can commence or operate a payment system, except with an authorization issued by the RBI.

    Existing payment systems would cease to have the right to carry on their operations, unless they obtained an authorization within six months from the commencement of the act in August 2008.

    The act also provides for RBI’s audit and inspection of the operation of authorized payment systems.”

    “The Indian government is worried that intermediaries like PayPal are being used by freelancers who do not pay income taxes for income earned abroad, and also by financiers of terrorists in India, the analyst added.”


    “Ignorance of the law excuses no man”
    John Selden (1584-1654)

  10. It’s more concerning taht a company such as Paypal could “overlook” such an important regulation.

    I think this is really telling of the level of people at the top within Paypal, surely some heads have rolled for this…unforgiveable, and we have to trust them with our money, I wonder what else is being “overlooked”.

    Paypal removed from our websites last week due to lack of use and high percentage of claims from buyers.

    Now with Sagepay (Direct), claims dropped to almost nil and the payment process is seamless. 🙂

  11. 😯

    “PayPal has suspended personal non-commercial payments to Indian accounts, and intends to apply for a license from the Reserve Bank of India”

    “Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 17th day of February, 2010.”

    John Donahoe
    President, Chief Executive Officer and Director

  12. It’s really really bad. Well it’s saying all personal non-commercial payments stopped, is that mean only personal payments blocked and persons withdraing funds to their commercial company’s name account (and in current account) will get money. Still confusion.


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