PayPal to resume bank withdrawals by Indian exporters

However, personal payments into India continue to be suspended

PayPal said that India's central bank, the Reserve Bank of India (RBI), has allowed it to resume Indian bank withdrawals for Indian businesses who use PayPal to sell their goods or services abroad.

Personal payments into India will however continue to be suspended, as the RBI has told the online payment company that it needs specific approvals to allow personal inward remittances to India, Farhad Irani , head of PayPal's Asia-Pacific business, said in a post on Friday on the company's official blog (https://www.thepaypalblog.com/2010/02/resuming-local-bank-withdrawals-to-india/).

PayPal does not have authorization in India to provide cross-border money transfers, Alpana Killawala , a spokeswoman for the RBI, said earlier this month, after PayPal announced on its blog that personal payments to and from India through PayPal had been suspended.

PayPal needs authorization to operate a cross-border money transfer service, under the country's Payment and Settlement Systems Act, 2007, and it does not have it, Killawala said.

The Payment and Settlement Systems Act, 2007 stipulates that no person other than the RBI, shall commence or operate a payment system, except with an authorization issued by the RBI under the provisions of the Act.

By the subsequent agreement between RBI and PayPal, exporters will be required to fill out a new field entitled 'Export Code' when they request a withdrawal, Irani said in his blog post. This information is required under current Indian laws in order to identify the nature of cross-border merchant transactions, he added.

An Importer Exporter Code (IEC) is allotted to exporters in India after they provide detailed information on their businesses, including their income tax identification number.

The Indian government is worried that intermediaries like PayPal are being used by freelancers who do not pay income taxes for income earned abroad, and also by financiers of terrorists in India, according to analysts. By insisting on an IEC code for withdrawals by exporters, the RBI is ensuring that it gets the required information on the transaction, they added.

PayPal said it hopes to resume the bank withdrawal service by March 3. It added that it will post on its blog on March 1 with specific instructions for customers on how they can move their money into their bank accounts.

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John Ribeiro

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