PayPal says it has suspended personal payments to and from India, as well as transfers to local banks in India. The changes may be in response to new rules in India intended to restrict money laundering.

PayPal says it has suspended personal payments to and from India, as well as transfers to local banks in India, although it’s not clear from the company’s short blog post what the problem is or what’s being done to fix it. All it says is that the company is working with its ” business partners and other stakeholders to address questions they have about the service.” PayPal says that commercial payments can still be made to India but merchants in that country can’t withdraw funds in rupees to local Indian banks.

An unnamed analyst quoted by IDG News Service says that the changes may be related to new government rules in India that are intended to prevent or discourage money laundering. These rules, introduced last year, require financial intermediaries to verify the identity of clients carrying out international money transfers.

India has been taking steps to try and improve security as part of its anti-terrorism efforts, including banning the import of cell phones that don’t have an identity code and thus can’t be tracked. It’s possible that the Indian government is concerned about PayPal money transfers being used to fund terrorism, and is requiring the company to either verify who is making and receiving the payment or block the transfer.

According to one online forum discussing the topic, PayPal has been reversing payments since Feb. 1, sending users an email that states:


Your payment of $XX.XX has been returned to you. If you sent the payment with a bank account, the funds will be returned to your PayPal balance. If you paid with a credit card, the amount will be credited back to your card. We returned the payment to you because we have stopped allowing personal payments to be sent to or from India… If this payment was a personal payment, such as a gift to a friend or family member, then we request that you find another payment method until we restore personal payments to and from India. We are trying to resolve this issue as quickly as possible and we’re sorry for any inconvenience. Thank you, PayPal.

Another user said that he or she received an email from PayPal saying the company had suspended “specifically those funds transfers that do not have an underlying exchange of goods or services.” The email recommended that the seller contact the buyer and ask them to pay again, and specify that goods were the reason for payment. Other disgruntled and confused PayPal users are discussing the issue in forums here and here.

Post and thumbnail photos courtesy of Flickr user quaziefoto

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  1. PayPal Blocks India…Another Digital Roadblock that Limits Mobility | GottaBeMobile.com Monday, February 8, 2010

    [...] to the PayPal blog, the service is all but useless in India for the time being. According to an unnamed analyst, PayPal has had to severely limit its services in India due to the government’s efforts to [...]

  2. Finally got reply from the paypal that they are crediting funds back to the accounts :)

    1. When did you get the message from PayPal that they are crediting money to the bank accounts?
      I had withdrawn it on Jan 26.
      Yet it doesn’t reached my account .

  3. I am in trouble. I didn’t get my $300 in my bank till now and can’t receive freelance payments from clients.

  4. I just made a transaction yesterday using paypal for 7 euros. No problems for me, at least.

  5. Saikat Sengupta Monday, February 8, 2010

    PayPal verifies the name and address of the users by sending a unique pin through credit card bill. Then why don’e they exempt the verified users from this mess?

    Shockingly, there was NO announcement from their end. Money is not getting deposited to bank, but the amount is deducted from PayPal balance.

  6. They first halted the service without any prior notice. Next, they reversed payments received to the senders back.

    Also, they stopped Bank withdrawals, and today they reversed it and while reversing the money, they charged currency conversion fee, which is unprofessional as that money was never transferred to the end user anyway!

    Lets join the Facebook group, list our views and problems there and let our voice heard http://www.facebook.com/group.php?gid=297437668797

  7. Paypal hits Indian customers! What next? | Business Tuesday, February 9, 2010

    [...] Paypal has started playing around with every account holder from India. Removed personal payment option, and halted everything else like withdrawals etc. everything without a notification. Whatever [...]

  8. We’ve just posted an update to the PayPal situation in India on our blog: https://www.thepaypalblog.com/2010/02/update-on-paypal-situation-in-india/

  9. Are there any reliable alternatives to Paypal ? (If there aren’t then, maybe the Indian entrepreneurs have something to consider).

  10. Paypal india really sucks. I have business account and got payment from another business account, they reversed that payment. When i contacted customer support they send me readymade reply. They even don’t have time to hear customer. Can any body please bring the alternative of paypal, so we can switch immediately. End of paypal is started…

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