PayPal reversing India payments; here's why...

In the curious case of PayPal blocking and reversing payments to and from India, facts have been remarkably thin on the ground. The eBay subsidiary just says it's "really sorry," but just doesn't give any insight into what's going on. In IT Blogwatch, bloggers crowdsource the explanation: read on...

By Richi Jennings. February 8, 2010.
(EBAY)

Your humble blogwatcher selected these bloggy morsels for your enjoyment. Not to mention a Web site built using MS Paint...
 
 
Robin Wauters dribbled out the story late last week:

PayPal ... appears to be blocking personal transactions to or from accounts of India-based users. It is reversing personal transactions.
...
Anuj Nayar, Director, Global Communications at PayPal tells us: "I can confirm that personal payments to and from India have been suspended. ... We’re trying to resolve the situation ... we’re sorry for any inconvenience this may cause."

Angie Mohr has more:

Commercial payments will not be affected in the interim and Indian merchants can still charge their customers around the world and receive payment into their PayPal accounts as always. ... However, the company does not detail the nature of the concerns.
...
The suspension is likely to affect thousands of small Indian freelancers, including IT programmers, web designers and writers, who use personal rather than business accounts to receive payments from customers. Many of these Indian freelancers are lashing out at the PayPal announcement and its lack of detail and information. Upgrading to a business PayPal account requires additional fees and charges and not all freelancers may be eligible to do so.

PayPal's Anuj Nayar says remarkably little in 116 words:

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. ... Customers can still make commercial payments to India but merchants cannot withdraw funds in Rupees to local Indian banks.
 
We’re trying to resolve the situation as quickly as possible and we’re really sorry for the inconvenience that this may cause our customers in India and around the world.

bhagwad is not a happy camper:

As a result, a large number of Indian Paypal accounts have a negative balances running into the thousands of dollars. The worst part is that users weren't informed beforehand — the funds were just whisked away.
...
Paypal hasn't given any explanation to this behavior other than they're looking into it. Although Paypal claims ... that payments made for 'Services' are not being reversed, this is not true. All payments not made for 'Goods' with a shipping address have been reversed — in fact, ... Paypal ... tells the Indian sellers to encourage their clients to lie and claim that they're paying for goods with a shipping address instead.

Kai Hiwatari thinks he has the answer:

This is due to some change in the regulations by the Reserve Bank of India (RBI) regarding offshore money transfers. ... RBI is demanding some documents form PayPal to make them eligible to transfer money to and from Indian Banks. Apparently PayPal hasn't been able to furnish those documents.

And iammani alleges shady tactics:

Of course. Paypal has to be registered with the RBI to make forex (foreign exchange) transfers. Every time someone converts rupees in dollars or vice-versa, the source and destination of transfer and reason have to made available to the RBI.
...
The problem is Paypal doesnt want to be regulated as bank but wants to be able to perform what banks do. And this does not go well with the RBI.

Keith Dsouza goes ballistic:

I sent a payment to someone who withdrew it to his bank. After a blue moon and when you realized your own problems, you decided to withdraw the money I sent to him. Now that would be fine, but you did not intimate him or me about it. Now after all is said and done, his account went into a negative balance. Oh and well it is our fault, we sincerely apologize for that, but still you threaten him that you will charge his mother’s credit card account to recover the dues??? Are you ****** ******* serious?
...
I ask every other user to withdraw their money and boycott PayPal, boycott PayPal forever. Never accept a payment in PayPal, if you think that this is the last time those ******** did this, you are wrong, if someone really cared about you and your money, they would first tell you about it.

So what's your take?
Get involved: leave a comment.
 
 
And finally...

• Web site built using MS Paint
  [hat tip: Mike Elgan]

Richi Jennings is an independent analyst/consultant, specializing in blogging, email, and security. A cross-functional IT geek since 1985, he is also an analyst at Ferris Research. You can follow him as @richi on Twitter, or richij on FriendFeed, pretend to be richij's friend on Facebook, or just use good old email: itblogwatch@richij.com.

 
 
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