Paypal, the biggest e-commerce business for payments and money transfers on the internet has been making buzz in India for all the wrong reasons. And it just got worse than ever before.

Here is a transcript of the mail we just got now

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.

Twitter as always was the first to react with tweeps all over India and even those staying abroad, expressing their displeasure about the way Paypal and RBI are treating their customers. Paypal on its part has tried its best to shift all the blame on RBI and its stringent guidelines, but it really beats me, as to why RBI is targeting Paypal alone.

Paypal has a forgettable history in India, specially the recent past, which has been marred with one controversy or the other.

Paypal’s FAQ has some answers, which are not convincing enough. Paypal says that no one can receive an amount greater than $500 for any goods or service and the reason they give is “to ensure that we continue to comply with the RBI Guidelines.

Things get worse if you run a e-commerce site in India with Paypal as a payment option. Why? A couple of reasons

  • Your Customers won’t be able to complete their checkout with their PayPal account balance unless they link a credit card to their account in before sending you money
  • You won’t be able to receive any transaction greater than $500

So, for now, Paypal in India is as good as DEAD. RIP Paypal India.

Also Read:

Raju is the founder-editor of Technology Personalized. A proud geek and an Internet freak, who is also a social networking enthusiast. You can follow him on Facebook and on Twitter. Mail Raju PP. Follow rajupp