PayPal restrictions for India users from RBI

An Indian webmaster who buys domain names and other services from me just informed me via chat that starting March 1st, 2011, he won’t be able to use PayPal anymore to pay me. He’s one of probably hundreds of Indian webmasters that I do business with. That means that if they take a hit, so will I, because I will be losing a certain percentage of my buyers.

Apparently, the Reserve Bank of India, India’s central bank, has imposed some restrictions on how PayPal users in India can use the money in their PayPal accounts. These new regulations will be in effect starting March 1st, 2011.

PayPal made an announcement on its website and listed the following restrictions:

  • Any balance in and all future payments into your PayPal account may not be used to buy goods or services and must be transferred to your bank account in India within 7 days from the receipt of confirmation from the buyer in respect of the goods or services; and
  • Export-related payments for goods and services into your PayPal account may not exceed US$500 per transaction.

Simply put, whatever money our Indian webmaster friends make online, they must withdraw. They are not allowed to use their PayPal money to purchase products or services online. This kind of defeats the primary purpose of having a PayPal account, doesn’t it?

If you are an Indian merchant and you’re selling export related goods (for example, jewelry, bags, anything that may be considered for export), you can accept payments via PayPal only if the sale price is US$500 or less. I guess that rules out the possibility of buying a Ferrari from India online.

PayPal Alternatives for Indian Webmasters

With PayPal almost impossible to use in India, what PayPal alternatives do Indian webmasters have? Here’s what I can think of that I have already tried:

  • Moneybookers
  • AlertPay
  • Western Union (a bit inconvenient because the recipient needs to actually go to a Western Union branch to claim the money)

Any other suggestions for PayPal alternatives?

  • Tharkar

    Appeal to RBI,
    Please remove pay pal restriction of US $500/- per transaction for registered companies in India for inward remittance into India. Else, all these small business companies may migrate to neighbor countries to carry out their business resulting loss to Indian exchequer.

  • Prakash

    Check out the circular send by the RBI to paypal at http://bit.ly/dOogoh

  • Vishal

    What is the exact fuss about?

    1. Paypal Limit of $500 per transaction – If a Publisher earns $500-$1000, he can set the minimum payout to $400 which is below ' $500 limit ' for Paypal. So, that way he can get the net amount in 3-4 transactions.

  • srihari

    In my view there is no alternative for paypal bcoz rest of the payment processors doesn't have user friendly options.

    Alert Pay does not supports the indian withdraws

    Western Union – Again a big issue with fee

    MoneyBookers – Similar but not that good to move a head

    Sri