Online payment giant PayPal has been notified by the Reserve Bank of India (RBI) that effective immediately all PayPal merchants in India can receive export-related payments for goods and services into their PayPal account up to USD 3000 per transaction. This has been raised from USD 500 per transaction limit current imposed. This is claimed to be a huge step forward for PayPal as well as for small and medium enterprise (SMEs) who can depends on Paypal for their export business through e-commerce.
After the nationwide dissatisfaction of SMEs and freelancers with Paypal and the Reserve Bank of India (RBI) over dictatorial rules put in place early this year with withdrawal limits of USD 500 per transactions, the RBI seems to have loosened its grip slightly over Paypal.
Mayur Patel, India Country Manager of PayPal commented on the declaration saying “We’re thrilled about the increase in transaction limit and would like to thank the Reserve Bank of India (RBI) for understanding and being supportive of the needs of SMEs who wish to expand their business through cross-border trade”
However, PayPal also reiterated that in order to continue using Paypal service, all Indian users need to add their Permanent Account Number (PAN) and Purpose Code and add their bank account to PayPal. Paypal had, earlier this year, enforced all Indian users to have a PAN or Permanent Account Number, purpose code related to the majority of commercial activities for export-related payments and a bank account in India (if not previously added).
The purpose of adding the bank account was auto withdraw the PayPal balance out of user’s PayPal account and transfer the balance to respective bank account in India. If one does not add a bank account in India to his/her PayPal account then that particular PayPal account becomes limited from receiving export-related payments. However, as reported earlier in the report Paypal stabs freelancers again with auto-withdrawal, the imposition of PAN numbers had troubled to an extent most proprietorship business user accounts.
On the other hand, with the “good news” of the increased limit of USD 3000 now being allowed to Indian merchants, concerns would are now clouding because of the “Auto-withdrawal” enforced by Paypal. Mentionable that Paypal has now been enforcing daily auto-withdrawal of funds for Indian users from September 26, 2011 in order to “comply with RBI guidelines”
Due to the policy of amounts getting auto-withdrawn, the customers are forced to accept the exchange rate of the day. They cannot retain the amount or seek a favorable exchange rate for withdrawal even though the RBI had earlier set a time limit for seven days. Now although the transaction limit is increased to USD 3000 dollars, it would mean more value of funds auto-withdrawn at whatever exchange rate applicable.
Also, as reported earlier, Paypal is often accused of offering lower currency conversion rates (rates lower than the global market of the day). Now that the transaction limit has increased and bigger value of funds would be auto-withdrawn or self-withdrawn, the Indian merchants might end up losing quite some amount in transferring. It’s only a matter of time when it would be proved whether or not the “good news” leads to a win-win situation for Paypal and its users.