NYT : India’s Central Bank Stops Some PayPal Services

uycw Active Member

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http://www.nytimes.com/2010/02/11/business/global/11paypal.html

NEW DELHI â€” Thousands of small companies here are facing a cash crunch after Indiaâ€™s top bank regulator suspended some PayPal services in the country.

Many small information technology companies and freelance computer professionals rely on PayPal, the online money transfer company, to receive payments from overseas clients. PayPal allows them to bypass cumbersome and expensive international bank transactions.

But the Reserve Bank of India said Wednesday that despite the online payment serviceâ€™s ubiquity in India, it is not properly registered.

â€œProviders of cross-border money transfer service need prior authorization from the Reserve Bank under the Payment and Settlement Systems Act,â€ a spokeswoman for the Reserve Bank of India, Alpana Killawalla, said in an e-mailed response to questions. â€œPayPal does not have our authorization.â€

The act, adopted in August 2008, regulates payment and settlement methods in India. Ms. Killawalla did not provide further details.

PayPal recently explained the situation in India after receiving numerous complaints about payments that went through but were then reversed.

The company said Feb. 6 on a blog post that â€œpersonalâ€ payments, or those made from one individual to another, had been suspended to India, but Anuj Nayar, a spokesman for PayPal, said in an interview that the company was communicating directly with customers before that. People and companies in India can still receive â€œcommercialâ€ payments for goods and services, but they are unable to move money from PayPal into their bank, it said.

It may take several months, the company said, to resolve issues over personal payments with Indian regulators, but it hoped that customers would be able to withdraw their funds to Indian banks within days.

â€œWe are working very closely with the regulators,â€ Mr. Nayar said.

In a blog post, Mr. Nayar apologized â€œon behalf of PayPal for the inconvenience that this is causing our customers.â€

It took PayPal which is owned by eBay in San Jose, Calif., more than a week to notify customers after being flagged by Indian regulators. The Reserve Bank of India said it asked the company on Jan. 27 to immediately suspend PayPal payments to and from India as well as transfers to local banks in India. PayPal said it complied with the request the next day.

Executives from both Indian and American information technology companies say they were caught off-guard by the announcement.

â€œLike all the freelancing sites, we rely on PayPal,â€ said Alok Maheshwari, founder and chief executive of Harmony Infotech, a nine-employee Web development company in the south India state of Andhra Pradesh. â€œWe used to get a check in our company name mailed to us instead, but we stopped because PayPal is very easy to use.â€

Harmony Infotech has been relying on PayPal since 2005, and now averages about $1,500 a month in PayPal transaction payments.

On Feb. 2, Harmony Infotech got a payment via PayPal from Rent A Coder, a Tampa, Fla., company that connects computer engineers with jobs, and Mr. Maheshwari said he moved the payment to his companyâ€™s bank account in India. Two days later, the payment was reversed, leaving him with a negative PayPal balance. The payment was a â€œcommercialâ€ and not personal payment, he said.

PayPal says that only personal payments should have been reversed, and that if a commercial payment was reversed, the payer should resend the money. Some PayPal users send commercial payments as personal payments to avoid the fees on commercial payments.

In a notice on its Web site to the Indian companies it hires, Rent A Coder said â€œWe have never received a coherent answer from PayPal as to why they blocked any of the payments.â€ To avoid the uncertainty, Rent A Coder suggested a switch to Payoneer, an alternate online payment site, which is â€œoffering a special to Indian workers.â€

The Reserve Bank has sent PayPal a list of questions, focusing on whether or not personal payments to people in India qualify as remittances, or wire transfers of cash, PayPal said. The regulators told PayPal that they had revised remittance licensing rules.

PayPal does not consider itself to be in the remittance business in India because accounts are online only. Recipients must transfer the money to a bank account to withdraw it.

Payments to other countries are a growing business for PayPal. Cross-border payments account for about 25 percent of PayPalâ€™s total $71 billion payment volume last year. PayPal does not have a domestic business in India â€” all payments are from other countries.

PayPal does not break out payment volume for India, but in 2008, the last year for which PayPal made data available, it processed $4 billion in total payment volume in the Asia Pacific region, most of which was in Australia. PayPalâ€™s India business is â€œrelatively small, but fast-growing,â€ Mr. Nayar said.

Heather Timmons reported from New Delhi and Claire Cain Miller from San Francisco.
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uycw, Feb 11, 2010 IP

vitrag24 Active Member

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#2

damm...i hope they will resolve problem.

vitrag24, Feb 11, 2010 IP

Bohra Prominent Member

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That gives us some more information

Bohra, Feb 11, 2010 IP

uycw Active Member

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Bohra said: ↑

That gives us some more information
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But PayPal have not released any official statement to Indian customer!

uycw, Feb 11, 2010 IP

radhika.writer Well-Known Member

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#5

uycw said: ↑

But PayPal have not released any official statement to Indian customer!
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This is the main issue, PayPal is not making any official announcement in this issue through which we can be sure that when this gonna be resolved..

Thanks

radhika.writer, Feb 11, 2010 IP

harrisunderwork Well-Known Member

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#6

uycw said: ↑

But PayPal have not released any official statement to Indian customer!
Click to expand...

Because if they would, it is quite probable that they would lose a growing market. That's very simple.

harrisunderwork, Feb 11, 2010 IP

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NYT : India’s Central Bank Stops Some PayPal Services

uycw Active Member

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uycw Active Member

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