PayPal’s new rules based on RBI Guidelines – Blow on Indian Freelancers


In a country where Governments give a blind eye to crores and crores of money fraudulently transferred to foreign accounts, where corruption and scam by top capitalists and ministry officials come second nature, there has come a new set of rules and regulations to create only inconveniences to small Indian SMBs and independent freelancers. For those who are still in the dark, the news is that,- PayPal has announced that with effect from 1st of March, 2011, they will be restraining Indian users from using the money in their PayPal account to purchase 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 of more than $500.


Just as ever, the blame game of the economist and the experts have already started debating whether PayPal or the RBI is at fault. While it can be easy to summarize that PayPal is simply trying to avoid hassles with the RBI’s new guidelines, a deeper study reveals that as an entity, they hardly have a choice but to make the changes above. With the new regulations of RBI, any entity which provides on-demand payments have to be regulated as a bank and if they keep the money for more than 7 days they have to provide users with interest. With this new change, PayPal would have been bound to reveal all their business policies and operating module to the Indian Government, which they certainly wouldn’t want to do.  Again, as per the new regulation, any entity who bring cash-flow into India have to mandatorily report transactions above $500 to the RBI and government. By restricting the payments to $500, they have no obligation to report it to the Indian authorities and can continue with their business as usual.

On the other hand, by making it compulsory for exporters to transfer payments to accounts in Indian banks within a specified time frame, the RBI hopes to better monitor the flow of funds into India, and also ensure that tax is paid on the income. However here lies the problem, -the facts and the odds are simply against the small-scale freelancers who make a living through exports or outsourcing. A limit of $500 per transaction or only 7 days time frame is far too aggressive and would create huge inconveniences to the Indian small-scale merchants and outsourcing service providers. The very fact that PayPal customers will need to link a credit card to their account before sending or receiving money from PayPal is designed to help the foreign economy (especially US economy) such as Visa Inc. or Maestro (MasterCard Inc.)

The new guidelines from RBI are once again a hit to the booming small-scale industrialists and a boon to the big capitalists of the country. However, it’s a real shame that the focus of these new directives is still on restricting the money flowing into the country, but not on the money flowing out. Be it be the thousand crores worth Hawala Scam, IPL scam, 2G Spectrum Scam or Commonwealth Games scam, India has become house to a billion dollar industry called corruption. It’s high time RBI or the Government stopped fooling and creating inconveniences for common people in the name of outdated directives. The big fishes still loiter with big bucks and heavy pockets, and the commoners have to worry about a 7-day deadline and limit of not more than $500(!) every time they work hard for a foreign firm. We see India growing into nothing but a complete capitalistic country with such moves and desi-democracy will inevitably suffer.

About Priyankan Goswami

Priyankan Goswami Priyankan Goswami is the Editor of Times of Assam's Political Analysis section. He is also founder member and member of the Executive board of Times of Assam. By Academic Priyankan Goswami is MBA & Mechanical Engineer.


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9 Responses to "PayPal’s new rules based on RBI Guidelines – Blow on Indian Freelancers"

  1. Raches  January 31, 2011 at 02:36 AM

    I am a 30 year old guy, and I work too hard every month to earn some hundreds of dollars out of all, we have a small set-up as well, where we need to pay bills frequently. PayPal’s service has been a great support for a guy like me, but being an Indian I couldn’t have expected anymore from our Government. Thanks so much Governing bodies. This is what I say HYPOCRITE.

    • Mobsy  January 31, 2011 at 07:53 AM

      well, I guess the issue is not with’s the paypal

  2. Mobsy  January 31, 2011 at 07:51 AM

    Yes of course it is very clear that PayPal is being very irresponsible here and trying to put the blemish on RBI.. definitely bad bad decision on freelancers and SMB’s across India!

  3. Jhone  January 31, 2011 at 02:59 PM

    RBI is playing the dirty game. Govt. is always behind the common man. They cannot stop the black money of the corrupt politician. They cannot control the increase in price rise. They can only squeeze Aam Admi. The RBI policy makers are always blind for ordinary people.

    Throughout the world, people are using PayPal. We Indians cannot. Hundreds of housewives, retired man and young entrepreneurs were using PayPal to earn their bread.

    To keep the skill up to date we need latest software and technology. Through PayPal and Internet people were getting that easily. Now, we cannot purchase any low priced ($10) software, book etc from internet.

    What a shame !!

  4. Mayank  February 01, 2011 at 12:54 PM

    RBI has just killed small business in India. RBI is acting like Nazis and treating freelancers like me as Jews.

  5. android app review  February 01, 2011 at 02:54 PM

    I agree with what both parties are doing , both are right and stand on their terms but the people who are suffering are us . The common man is the one who ends up in problems because of disputes between two parties

  6. Anusha  February 03, 2011 at 05:00 PM

    There certainly has to be a definite set of rules, but these rules seem favourable to the established and not the budding industrialists.

  7. Yogendra Chaturvedi  February 04, 2011 at 05:04 PM

    I am doing on line job as part time due to unemployment, this may affect my job or income.

  8. Rakesh  March 05, 2011 at 11:39 AM

    It’s really a big blow for small IT company. RBI must reconsider over their decision!

    Jai Small IT Industries!!!!!!


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