PayPal Team Shocked Indian Freelancers with New Rules

Ritesh Warke On Saturday, January 29, 2011

PayPal team shocked Indian PayPal users by sending them a surprise Email last night. In

the Email PayPal team stated new terms and rules for Indian PayPal users. Here is a preview of Email from PayPal:

With effect from 1 March 2011, you are required to comply with the requirements set out in the notification of the Reserve Bank of India governing the processing and settlement of export-related receipts facilitated by online payment gateways (“RBI Guidelines”).

In order to comply with the RBI Guidelines, our user agreement in India will be amended for the following services as follows:

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.
Now lets get into detail of whole PayPal fiasco. I hope every one remember last year problem with PayPal, when they stopped personal payment to Indian PayPal users and later on they stopped the option to withdraw money into your bank account.

$500 limit for Indian PayPal users:

This is a one of the biggest issue for freelancers, developers and affiliate marketers. Now we can’t get payment of more than $500 at one go. Though we can always ask us client to send money in two transaction which should be lower than $500 each. But for affiliate payment, this will be a big issue. As it is, dreamhost affiliate program, doesn’t offer PayPal payment option for Indian users, but my other affiliate program like Hostgator which pays me more than $500 every month, it will be an issue. I hope dropped an email to Hostgator and couple of others company I’m associated with, to know what steps they going to take for Indian affiliate marketers.

PayPal fund can’t be use to buy goods or services :

This is something which I loved the most about PayPal, that we can use PayPal money directly to buy any thing online. But with this new rule, we can’t use our PayPal balance to buy anything and more over you will have to withdraw your money within 7 days. This particular point is insane, specially people receiving small checks. As if you are withdrawing money below 7000, PayPal will charge INR 50. So imagine if you are getting paid in small amount, with every transaction you will be losing money. And if you will be buying anything using PayPal, you will be using Credit card. And you will lose big chunk of money in currency conversion.

This is not the first time Indian PayPal users are facing such problem but this time these new rules are going to bring restlessness among Indian Freelancers and online marketers.

I know we still have 1 month to look for PayPal alternatives, but I hope that PayPal team should try to work closely with RBI (Reserve bank of India) and work out on both the new rules.

Keith from Techie-buzz has brought some nice aspect of this whole PayPal 1st March fiasco. People who are blaming RBI (Reserve bank of India) for all PayPal issue should stop doing this. Because the problem is in the TOS of Indian currency rotation rule. According to RBI rules:

Any company keeping money for more than 7 days have to pay interest and should be treated like a bank.
Any transaction which bring money more than $500 at one go, should be reported to RBI.

So the point is, PayPal wants to run themselves as free entity and not something bound with lots of rules and regulations, which is fair on their part. But by the end of the day, it’s Internet marketer like us which will suffer the most.

I hope in next one month, PayPal and RBI will work together closely to make some changes in above rules and will give peace of mind to Indian freelancers and online marketers.

Do let us know how your business is going to be affected with these new rules and what suggestions would you give to RBI and PayPal to overcome this issue?

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