Paypal has made some important changes to user agreement today, which are important for Indian Paypal users to understand. Effective from 1st Nov 2010, Indian users cannot use Paypal for receiving or sending personal payments. Indian registered Paypal accounts may neither send nor receive personal transaction payments. This means that you cannot send personal transaction payments to Indian registered Accounts.

What does this mean for Indian Paypal users who are receiving payments from other countries?
If you are an Indian Paypal user and have monthly recurring payments set up with your clients across the world, it makes sense to convert your personal account into business account. So you can carry on receiving payment from other countries and you can send the payments too.

What’s the different between my existing personal Paypal account and business Paypal account?
Paypal allows some free personal payment transactions but it charges a small fees for business transactions. For every business transaction you do, there will be a small percentage of payment deducted as a fee by Paypal.

The upcoming policy updates are available at Paypal website.

Paypal will be allowing the withdrawals to Indian local banks after the announcement today. Currently, it’s allowed to business customers who are exporting goods and services globally (provided they have export code, which we will talk about shortly) but currently these is no decision for individuals unless they decide to start the business and get the import export code (IEC) from Government of India.

How to get Import Export Code for Paypal payments?

Importer Exporter Code  (IEC Code) is mandatory for any person or entity who wants to make any Import or Export. IEC is unique 10 digit code issued by Director General of Foreign Trade , Ministry of Commerce, Government of India to Indian Companies. The IEC code is permanent in nature until it’s surrendered by the IEC holder or cancelled by the Licencing Authority upon any default made be the IEC holder. one wants to export or import any goods, one needs to have an Importer-Exporter Code (IEC). The certificate is issued by the Director General of Foreign Trade (DGFT) and needs to be registered as an individual, firm, organization, entity. You can register for Importer Exporter code online at Indian Customs and Excise gateway.

Today I received an email communication from Paypal today that confirmed Paypal will resume withdrawals to Indian local banks from 3rd March 2010 onwards. They were in talks with RBI (Reserve Bank of India) and RBI has allowed Paypal India to to resume bank withdrawals for settlements for exports of goods and services. Paypal is currently making changes in their system to comply with RBI guidelines, which will require every Paypal India user to fill a ‘Export code‘ while they withdraw money to their Indian bank account (ICICI, HDFC, Punjab National Bank, OBC, HSBC, Citibank anything).

What does this mean for you?

If you are business in India who is selling goods and services globally, you may be good to go and use Paypal to withdraw the payments. If you don’t have import export code yet, you may read about Export code required.

There is still no word about individuals payments to India. This bit is still confusing for individuals.

Paypal halted the personal payments to Indian banks after authorities in India objected to no compliance with Indian regulations on 26th Jan 2010.

Here is the email I received -

Dear XYZ,

We have been diligently working with the RBI and our business partners to resume Indian bank withdrawals for the thousands of Indian businesses who depend on PayPal to sell their goods or services in the global marketplace.

Today, we are happy to announce that the RBI has allowed us to continue local bank withdrawals for settlements for exports of goods and services.  We are currently making changes to comply with Indian regulations for settlements for exports of goods and services, and we anticipate that, as of Wednesday, March 3rd, customers will be able to use our bank withdrawal service.

As part of the changes, you will be required to fill out a new field entitled ‘Export Code’ when you request a withdrawal. This information is required under the current laws of India in order to identify the nature of cross-border merchant transactions.

On Monday, March 1st, we will be back in touch with specific instructions on how you can move your money into your bank account.

Moving forward, the RBI has told us that PayPal needs specific approvals to allow personal remittances to India, which we currently do not have.  Until we get these approvals, personal payments into India will remain suspended.  However, if you are an exporter, you will continue to be able to use the PayPal service for payments of goods and services.  In fact, with the changes we are making to our system, PayPal is now set to be a more powerful engine for exporters in India.  With purpose codes for export transactions and FIRCs (Foreign Inward Remittance Certificates), you should now be able to get the export related benefits you seek.

You can check the PayPal blog for additional updates.

We thank you for your business and for your patience during the past few weeks.

Sincerely,

PayPal

So what changes you are expected to do in your Paypal account?

I would imagine that Paypal will ask you to accept the new terms and conditions in the first week of March and you will have to fill the ‘Export code‘ while withdrawing the money. My suggestion to individuals is not to rush on withdrawals immediately, meanwhile the things would become clearer on individual payments.

Paypal’s recent move of allowing withdrawal of Paypal money on Credit / debit cards has been welcomed by all Non-US publishers who earn money in USD and see their money lying in Paypal accounts. The only reason for people not willing to withdraw money from Paypal through checks was the time and fees involved earlier in withdrawing Paypal money.

It’s a fact now, that there are many top Indian bloggers like Amit, who have become full time publishers and make money online by online advertising and reviews. Big chunk of their money must be coming through Paypal, and I will call it as a boon for Indian publishers.

This Paypal e-Transfer facility is available with following banks in India: Axis Bank [UTI Bank], Bank Of India, Canara Bank, Citibank India, HDFC Bank, HSBC, ICICI Bank, ING VYSYA Bank, Standard Chartered Bank, State Bank Of India, Union Bank of India.

While adding your bank account to Paypal, your last name [surname] will be pre-populated but the money can be transfered to anyone in your relatives who share the same last name.

You might face a little problem while adding your Bank Account in India to paypal, if you don’t know the IFSC Code for your bank branch. You can check out the IFSC Code [Right click and save] for your bank branch in India here or download here from Life is Colourful.

[From Paypal] The Indian Financial System Code (IFSC) is an alpha-numeric code designed to uniquely identify bank branches in India. This is an 11 -digit code with the first four characters representing the bank code, the next character is a control character, and the last 6 characters identify the branch. The Reserve Bank of India publishes the IFSC and MICR codes.

Please make sure that you bank account name and the name in bank account added to Paypal are exactly same, or your transferred money will be returned with charges of INR 250.

Paypal will not charge any money for withdrawal amount of 7000 or more. Anything less than that will be charged INR 50. This is really a good news for Paypal users in India and reason to rejoice!

Many of the non-US publishers and reviewers must have been struggling to find out ways to receive their hard earned money in Paypal. Earlier, there was only way to receive Paypal money was to ask for a check and deposit in the local bank. In the asian countries like India, Philippines – it takes around 7-10 days to receive the check from US and 21-28 days to encash the check after depositing in local bank. It was not only waste of time but waste of money as well. Paypal charges $5 to release the check, and on top of that the local bank also charges for deposit of foreign currency checks. And these bank charges vary from bank to bank.

When using credit cards and debit cards is part of day-to-day life, receiving the Paypal money on your credit, debit cards is the best feature they have provided till date for non-US publishers – in my humble opinion. This is pretty easy process now.

This feature is available Paypal users in 26 countries wiz Argentina, Brazil, Bulgaria, Chile, Cyprus, Estonia, Gibraltar, Iceland, Indonesia, India, Israel, Italy, Latvia, Lichtenstein, Lithuania, Luxembourg, Malaysia, Malta, Philippines, Romania, San Marino, Slovakia, Slovenia, Turkey, UAE, and Uruguay.

To take benefit of this feature, follow these steps -