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.

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

By: Priyankan Goswami Read time: 10 min