PayPal To Restore Bank Withdrawal Service In India On March 3rd

About three weeks ago, eBay’s electronic payments daughter PayPal suddenly started blocking personal payments going in or coming out of accounts from Indian customers, resulting in a flood of online complaints from the latter that ranged from accusations of racism to sheer amateurism.

Last week, rumors that PayPal was actually forced into halting personal payments <a href="http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/RBI-halts-ops-of-remittance-portal-Pay-Pal-in-India/articleshow/5571419.cms”>by Reserve Bank Of India (RBI) because they did not comply with all relevant regulatory requirements, were confirmed. Last night, PayPal posted a status update on its corporate blog, saying that they anticipate to resume part of its service, namely bank withdrawal abilities, as of Wednesday, March 3rd.

From the blog post:

We have been diligently working with the RBI and our business partners to resume Indian bank withdrawals for the thousands of Indian businesses who use PayPal to sell their goods or services in the global marketplace.

I’m pleased to tell you that the RBI has now allowed us to resume bank withdrawals for settlements for exports of goods and services. We are currently making changes to comply with Indian regulations for settlements for exports of goods and services, and we anticipate that as of Wednesday, March 3rd, we will be able to resume the bank withdrawal service.

As part of the changes, Indian customers will be required to fill out a new field dubbed ‘Export Code’ when they request a withdrawal (here’s how to get one). This information is apparently required under current Indian laws in order to identify the nature of cross-border merchant transactions. PayPal will share specific instructions on how users can move money into bank accounts on Monday, March 1st.

Update: more details are available here – PayPal will henceforth require a ‘purpose code’ which is different from the Export Code we mentioned above. This code helps users’ banks furnish information that may be required by the Reserve Bank of India to identify the nature of the cross border transaction.

But Reserve Bank Of India has informed the eBay company that it requires specific approvals to allow personal inward remittances to India, which it currently does not have. In other words: PayPal is still forced by law to effectively suspend personal payments going into the accounts of its Indian customers for the foreseeable future, unless they are exporters.

We’ll provide an update when that changes.