Oh NO, Paypal does it with India (RBI) AGAIN - Is this an annual joke now?

Goodness !!

After Jan 2009 and Jan 2010, we are back to the annual drama in Jan 2011 between Paypal and Govt of India - rather, the Reserve Bank of India (RBI).

I had initially thought it was RBI who was wrong at it when I received the following email and realized that every Paypal India user received it.

But then, I read the remaining and realized after reading an ex-employee of RBI that that Paypal is again acting the Smart Guy and has got it wrong once more. God, give Paypal some real competition rather than letting them toy around.

Here is what Paypal says (and it is flooded around the Internet in the last few hours).

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Dear <Name>,

As part of our commitment to provide a high level of customer service, we would like to give you a 30-day advance notice on changes to our user agreement for India.

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:

1. 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
2. Export-related payments for goods and services into your PayPal account may not exceed US$500 per transaction.

We seek your understanding as we continue to employ our best efforts to comply with the RBI Guidelines in a timely manner.

We regret any inconvenience caused to you and hope the advance notice will enable you to plan your future use of our services accordingly. For further information, click here.

If you have any questions, please contact PayPal customer support by logging into your PayPal account and clicking on ‘contact us’ at the bottom of the page. We sincerely thank you for your patience and continued support.


Sincerely,

The PayPal Team
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And here is what I found as the interview. Original link is here.

Here's what the interview says.

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So as you already know by now, PayPal is busy screwing small Indian SMBs and independent freelancers who rely on the service to send and receive payments. This is definitely not the first time this has happened, and will definitely not be the last one.
In a recent email and blog post, PayPal said that they will be restraining Indian users from using the money in their PayPal account from purchasing anything along with putting a stipulation that they have to withdraw the money within 7 days. In addition to that, they have also said that Indian users cannot accept payments more than $500.
Many users have been blaming the Reserve Bank of India (RBI) for this, but most of them haven’t done any fact-checking as such and are just blaming it because they feel that PayPal has no faults whatsoever. So I sat down with one of my roommates who has been an ex-RBI employee for 7 years to understand why this is happening.
Let me take you through this. First of we take a look at why PayPal cannot keep your money with them for more than 7 days and then delve into the $500 restriction they will be putting into place. Here is the actual conversation edited in some for by me without changing the details.
Me: So PayPal says that they cannot keep the money in their account for more than 7 days? Why is this happening.
RBI-expert: Because if PayPal keeps the money with them, they have to be regulated as a bank and PayPal does not want that to happen. Any entity which provides on-demand payments have to be regulated as a bank as per RBI rules. With this new change PayPal is basically circumnavigating this regulation so that they don’t have to answer questions to any government about how they conduct business and why they charge an exorbitant amount to them to accept payments.
Me: So you are saying that PayPal is practically f*cking all Indians.
RBI-expert: No I wouldn’t say that, but I would say that their business heads know how to circumnavigate against a country’s policies and that they are adamant about accepting regulations because that would mean that they have to cut down on their charges and also ensure that they do follow all guidelines laid down for a bank.
Me: Ok, so I see that they are screwing their customers with a hefty fee and now this. I do understand that they want to make money, but what is about $500 transaction limit.
RBI-expert: Well, once again this is a government and RBI mandated thing. All entities who bring cash-flow into India have to basically report transactions above $500 to the RBI and government. PayPal is basically just circumnavigating around this mandate by restricting the payments to $500. Once they do this, they have no obligation to report it to the RBI or the Indian government.
Me: So you are basically saying that these new changes by PayPal is just about screwing the RBI, Indian Government and people who use their service.
RBI-expert: Well, these are the rules. I will simply say this. If PayPal accepts the RBI regulations they have to be treated a bank and I can see that they are hell bent on not doing it. They are basically finding ways to get over it because once they become a bank they come under a different set of rules. Right now PayPal is a monetary service but they are not like say SBI, ICICI, HSBC or Citibank and do not have to adhere to the rules. Once you become a bank, you have stringent rules which I don’t think PayPal wants to follow.
So as you can see, from the above conversation which came through from a horse’s mouth, I feel that PayPal is basically cheating the RBI, Indian government and Indian users because they don’t want to be regulated. All I can say is that we need to boycott these services, check out some PayPal alternatives.

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Gosh !!

Paypal, PLEASE come clean if you want to do business.

Implication to Warriors: You can now safely stop outsourcing larger jobs (worth $500) to India.