In a worst ever decision, Paypal India has announced that the issue of suspending personal payments will continue for the next ‘few’ months.
Here is the update on their blog
Why did you suspend local bank transfers and personal payments to and from India?
We temporarily suspended these services to respond to enquiries from the Indian regulators, specifically questions on whether personal payments constitute remittances into India.
We’re working with the regulators and our bank processing partners in India to get this resolved as quickly as we can. We realize that this is causing considerable inconvenience to our customers and I want to reassure you that this is a top priority for the leadership at PayPal
2. When will personal payments be turned back on?
The regulators recently let PayPal know about revised licensing rules that we are now actively engaged in securing. 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.
3. When will local bank withdrawals be available?
Customers should be able to withdraw their funds to a local bank within the next few days. In the meantime, we’re going to restore the money into the PayPal accounts of any customers in India who have initiated a recent withdrawal, so they know that the money is safe in their accounts. Customers will also be reimbursed for any withdrawal fee charges.
—
Am at loss of words – its a shame that Indian regulators and Paypal will take few months to resolve the issue [well, RBI takes Paypal as another Hawala route for money laundering.]
The seriousness of the issue can be gauged from the fact that there are 650+ comments on our earlier article (Paypal India Outage – No Payments to or from India) – with companies depending on Paypal for all their revenues.
What about Indian IT Act? Clueless about such services.
Answer this : Paypal Alternatives in India?
Truly a tragic situation… The livelihood of so many people affected. I wonder if the regulators are aware the effect of their decisions.
After all, there isn’t any Industry body like NASSCOM or watever for Freelance Developers and the likes who depend on paypal. Who is gonna make the noise to highlight the issues these people are facing? The best they can do is comment on blogs etc. but how much is that gonna reach the concerned people. I am not sure if the mainstream media has time for real issues like this or has highlighted this.
Perhaps the people affected should come together to form a body and highlight their concerns to the requisite authorities for a speedy resolution.
Well said Shashi. Freelancers need to form a Body. I don’t mind taking the initiative. Let us brainstorm on how to get this organized.
Ashish,
I know this is absolutely a tragic situation for hundreds of startups in India which depended very heavily on Paypal for payment (mostly from India based customers – so it does not always constitute remittance).
However, as Nikhil notes on http://www.medianama.com/2010/02/223-ebays-paypal-disallows-p2p-payments-transfers-to-local-banks/, Indian regulator (RBI) had strong opinions about transfer of money OUT of the banking system as stemming such transaction is equivalent of cash and it can have no track of this money and could easily be used for not-so-white transactions like Money Laundering http://en.wikipedia.org/wiki/Money_laundering or Hawala http://en.wikipedia.org/wiki/Hawala which are detrimental to country’s security.
When I analysed the curb on Wallet services (2-3 years back), I realized that Paypal could also not be allowed for long. And although I personally too feel it is a BIG let down, I was waiting for this to happen.
Now, you are one of the most aware of the startup scene now. It would be great if we could have a discussion on possible emergency options for startups in absence of Paypal payments. Could you please write a short post on that?
I am initiating a discussion on Headstart/POCC list right away. Let us all break our heads on how to resolve this problem. Would you like to lead such a discussion in SS Bangalore on 13th Feb? I can request Bangalore team to facilitate it.
Cheers,
Arpit
Well, that’s a very ‘theoretical’ view on this issue.
Just because there are goons, you don’t stop going out (okay..MyNameIsKhan is an example and maybe harbinger of instances to come).
There are multiple ways to verify transactions (after all, bank account is all you need. They aren’t delivering cash.).
I think this sets a good precedence. Companies like paypal which provide such a crucial service, cannot and should not take the law of land lightly. I do not understand why they could not register with RBI ? There are many legal channels of money transfer to India, for instance western union money transfer. Blaming RBI is the last thing we should do. RBI, in recent times, has been hailed internationally as the most efficient and capable central bank in the world. Their decision to compel paypal to register may seem bizzare in short term, however it should start a new wave of such services into this arena when Paypal registers itself and resumes operation
I am not sure, why legitimate business users have to worry about personal payments. We all pay 4% fee while doing business in PayPal. Why afraid of paying fees.
Why would it affect the companies? Paypal has just stopped *personal* payments. Which is meant for a transfer from an individual to another individual. Paypal still allows all commercial payments – which is what companies should be actually accepting. Looks like too many companies were cheating paypal by accepting personal payments. Paypal screwed them back.
What has Indian Companies got to do with Personal Payments?
The personal remittances from overseas can be sent to India using the following methods:
1. MTSS (Money Transfer Service Scheme)
2. Bank to Bank transfer
3. Rupee Drawing Arrangement (Not applicable for PayPal since it is for Exchange houses in Gulf primarily)
All the above are regulated by RBI in India. For MTSS, which is applicable for personal payments (classified as remittances) you need a specific license from RBI while for the bank to bank transfers, the transactions have to be routed through a bank.
Under the MTSS, the overseas entity has to be regulated in their own country and then they can apply for agents in India for disbursal of funds. Many like Western Union and MoneyGram etc operate under this route. However for the past few years, RBI has not been issuing any new licenses under this route.
My take is that PayPal till now has been routing its transactions under the Bank to Bank route and has been told by RBI that these would have to come under MTSS for which it has not been authorised by RBI. This seems to be the issue due to which PayPal is mentioning about taking a few months to sort out. But knowing RBI, dont think there really is a timeline you can really count on.
MTSS is not applicable for business transfers and hence those will be continued under the bank to bank transfers and hence they are even now being permitted.
If people are correctly able to classify their transactions as Business transfers and not Personal transfers, they might not be prevented by PayPal.
Good one Sandeep. Unlike the title of this blog, its not Paypay f**ks Indian companies, but Indian companies f**king themselves
not really..the reality is that a lot of indian cos./small outfits who solely rely on odesk/RAC for their existence.
Hi guys,
Just out of curiosity went to withdraw money from paypal by bank. Found new things on the bank withdraw page. Think, it’s going to get resolved soon.
What Sandeep says in his post makes sense with what paypal has written on this page. Personal payments (classified as remittances), the bank account has to bear the name of some other person. So, paypal has stopped that,no one can withdraw money in the name of other, there by stopping ‘remittances’.
Changing your name on your PayPal account
Please make sure that the name associated with your PayPal account exactly matches the name on your bank account statement. Otherwise, transfers to and from your PayPal account will not go through, and a return fee will be charged.
Personal and Premier account holders
Contact Customer Service if you need to change the name we have on file for you. Click Help on any PayPal page and select Contact Us. You may make this change for reasons such as a legal name change, a spelling mistake, or to add a secondary last name. For security reasons, you will need to provide supporting information. It’s not possible to put your bank account in another person’s name.
Business account holders
If your bank account is in your own name, you’ll need to switch to a PayPal Premier account to make transfers. The only difference between a Business and Premier account is that with a Business account you make transactions using a company or group name, and with a Premier account you make transactions using your own name. Please contact Customer Service to switch to a Premier account or to change the contact name for your business account. Click Help on any PayPal page and select Contact Us.
Rupak, Think this has been there for quite a while. I remember making a small spelling correction in my last name to match it with the name my bank records have. So you might have not seen any new thing.
The difference between premier and business accounts were also clearly mentioned when I upgraded mine. So IMO, these are not new changes.
Well, Paypal did’nt f*** Indian customers. Why would they ?
There is simply no way they can safely operate until the reserve bank is satisfied. The RBI should have given Paypal advance notice and time period to comply with whatever their guidelines are.
Are we regressing back to the 80′s when you had to run from pillar to post to get in $100 ?
Well, it’s not RBI’s mission to give them advanced notice. Paypal should have seen it coming.
Shouldn’t the title say “Indian freelancers” instead of “Indian companies” ?
No. I meant Indian companies. A lot of companies (infact, a whole lot of indian startup founders) are on oDesk for survival. Scan through ~700 comments and you will get an idea.
Roam around Koramangala/Jayanagar/Indira nagar area, do a quick study and you will find companies dependent on paypal for money transfer. Yes, one argument is that whether this can be considered remittance or not, but blocking something of this sort doesn’t help.
it’s the hopeless indian government. they want to eat on freelance’s bread now.
Will the RBI please check on the of crores being laundered by the guardians of our land and stop worrying about the pittance that freelancers,startups and small companies are legitimately making?
If you need to refresh your memory on the scandals please visit
http://en.wikipedia.org/wiki/Indian_political_scandals
Wonder what the RBI or Finance Ministry has done about the shameful list on the above page.
Way to go Ramesh. You hit the nail on the head. Every bank account is open to scrutiny by officials. How can we poor freelancers be hiding anything. Black money does not make its way to banks. This doesn’t make sense. Anyway what is clear is the the government will continue to target poor, common citizens trying to make a living while they continue to indulge in underhand dealings themselves. Does anyone have the guts to haul them up? This is disgusting. Pathetic.
And if PayPal is transferring money to Indian bank accounts what should be the problem? Aren’t bank accounts monitored anyway? Which money launderer, terrorist or anybody who wants to work around the system leaves a bank trail?
Hi
Xoom is not more working. My transfer was also cancelled, so i contacted them and got this email:
Dear Valued Customer,
Thank you for choosing Xoom to send your money transfer!
Unfortunately, we have canceled and are in the process of refunding this transaction identified as Intra-India. Current regulatory restrictions are the reasons for the cancellation. There are options to withdrawal your funds via Paypal, see the following link to assist in this matter https://www.thepaypalblog.com/2010/02/an-open-letter-from-farhad-irani-on-the-situation-in-india/
We have no time frame, when these restrictions will be lifted. you may check back in 2-3 months.
Respectfully,
Xoom Compliance Group
I also called them on this number 01242575678 and she confirmed that they changed their policies
Any idea what to do now?
Recent issues with PayPal withdrawals to Indian Banks & more over payments just randomly being reversed back to the senders will have a deep impact on PayPal’s reputation. It raises so many questions like (THIS MIGHT CONTAIN SPOILERS):
A) Should we trust PayPal in future?
ANS: ABSOLUTELY NO
B) Are they really concerned about our Money?
ANS: ABSOLUTELY NO, After a long period of two weeks we receive an apology letter stating that “We are sorry we goofed up opps!”? and stuff like “Your money just got sacked since this is nothing serious to us we are just doing a drill of playing a game with your hard earned money”?
C) Is RBI responsible for this?
ANS: UNQUESTIONABLY MAYBE, So, Question is why this is happening in India and nowhere else? Question is why we are being kept behind curtains and dark? Question is why Moneybookers and other Payment systems are working but PayPal is not? you just want to exclude the RBI out of this since they are least concerned with us. Everyone failed here! RBI off course you cant expect them to give you a comforting truth so a comforting lie should suffice you! And PayPal Ow man no shit a multinational company failing to inform and notify of an issue of this magnitude. That was an AWESOME combination of pure frustrating, destroying trust & spreading chaos.
D) So what does PayPal tell us now?
ANS: “We are sorry, but your valuable to us so please give us another opportunity to goof up and play some more engaging games with your money” and “We just love to make more profits by giving you a pathetic exchange rate”
D) What now?
ANS: DTA (Don’t Trust Anyone) Get your sleeves up against them and find your own ways to get paid over any other medium that serves better, communicates better and keep them in plenty. If one fails other should work out.
Ive let all my clients know about this issue and advised them (in advance unlike PayPal) to switch over to some other Payment system which is reliable, responsible and does the main thing “ACTION” at PAR. The truth will probably be dead and berried RIP about what happened because the shame and disgust they bring upon themselves is apocalyptic now.