Paypal India policy change: reversal problems - eNidhi India Travel Blog

Paypal India policy change: reversal problems

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PayPal is a popular online payment facilitator which is being extensively used by individuals and small companies for international money transfers, mainly of small amounts.

Paypal’s popularity increased mainly because of the simplicity with which one could transfer a few dollars to others. Those who didn’t have credit cards or international bank accounts relied heavily on paypal to make payments or earn money on their international assignments.

Suddenly, Paypal India has introduced a policy change, creating an outage which renders Paypal totally useless for small time users. As per their new policy, Paypal has stopped allowing personal payments to be sent to or from India, which means PayPal can be used only for business transactions, that too where there’s some proof of delivery for goods or services (such as shipment tracking number/billing address or other such evidences)

The worst thing according to me is Paypal has enforced this policy change without any prior notice or warning and is autonomously back dating the policy, enforcing it on already completed transactions. Pay pal is reversing such transactions done in recent past and causing huge inconvenience/loss to the stake holders who might have already delivered the services for that money. It is like your bank taking back your monthly pay deposited by your employer. Ideally PayPal (or any company for that matter) should have announced in advance that "From so and so date our new policy will apply", so that everyone could have made appropriate plans.

I was indirectly associated with an event management company (Name withheld has I've not taken permission), which sold tickets of one of its show (scheduled to happen in Chennai) online. Ticket buyers would pay via PayPal, will get a unique code showing which they could collect the printed tickets at the venue of the show. PayPal never hinted about its policy change, all tickets were sold and when organizers of the event wanted to withdraw money (which amounted to over 5 lakh rupees, as thousands of tickets were sold), PayPal blocked the account demanding that organizers show some proof, such as FedEx shipment number, that they’ve delivered the ticket. Physical delivery of tickets, for local customers, that too with reputed courier services that give tracking number makes the whole idea of online ticket booking useless. Imagine the inconvenience organizers will face when they're unable to withdraw money earned from ticket sales and they've to pay for the hall, artists, advertisements and sundry other expenses

I’ve bought 2 tickets for the show for the above event via PayPal and I didn’t get any communication from PayPal that they’re having a payment dispute or reversing the transaction so that I can buy tickets separately. In other words, PayPal has neither given my money to event management company, nor returned it to me. But the money I earned from some other source has been reversed from my account, I am not sure if it is returned to the sender.

Many individual, including this writer, got an email from PayPal which reads
Your payment of  xx has been sent back to the sender of the payment.
We reversed this payment because we have stopped allowing personal payments to be sent to or from India.
If this was a payment for a purchase of goods or services, and not a personal payment, then you may contact the buyer and have him or her resend the payment as follows:  (a) click the Send Money tab, (b) select "Goods," and (c) provide a shipping address.
If this payment was a personal payment such as a gift, then we have requested that the sender 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 hasn’t offered any explanation for this sudden change of policy and wordings suggest this could be a temporary measure. One good guess is that the personal type of payment, which is free of any charges, is being misused by companies and paypal needs to figure out how to prevent mis-use of this free service by corporates/professionals who should be paying a small fee for Paypal's money transfer services. Techcrunch has quoted a paypal official (Anuj Nayar, Director, Global Communications) saying :”I can confirm that personal payments to and from India have been suspended while we address some questions from our business partners. You can still make commercial payments. We’re trying to resolve the situation as quickly as possible and we’re sorry for any inconvenience this may cause.”

Most of online payments could be for activities like donations, or payments for some services (like an article submitted etc) for which there’ll be no physical goods to deliver. Paypal is used in cases where either sender or receiver is a small time operator or individual who cannot afford standard payment options like overseas bank account/credit card payment gateways etc. With pay-pal virtually shutting doors for them in India, soon they’ll be forced to identify an alternate payment mechanism (necessity is the mother of invention) and that will render paypal useless.

Money is a very sensitive matter and trust is paramount. Service providers like paypal should not be playing with other people’s money, without giving adequate warnings/time for their policy change. I am sure several individuals and companies world wide are put to inconvenience by this. If the trust and faith is lost it is very tough to regain.

I’m just watching the developments to see what happens. Image from

Work around /solution for Paypal India users:
Senders can select "Goods" as an option under "send money for" section, provide shipping address and proceed. But paypal might ask for some proof of delivery if they suspect this feature is being mis-used.

Feb 10 Update: Paypal is also cheating on withdrawals from paypal account to bank account. Any money withdrawn to bank account is reversed as well, but in the process paypal conveniently pockets about 10% of the money, in terms of currency conversion fees and withdrawal fee, twice-once on withdrawal and once again on reversal. For no fault of theirs users end up losing 10% outright because they attempted to withdraw money. Ideally paypal should have declared that withdrawals are not allowed or could have simply cancelled the transaction, but instead they chose silently suck money from user accounts, which is outright cheating and fraud.

One can cheat all people once or one person all the time. But pay pal can't cheat all users all the time. If they wish to shut shop in India or wish to change their policies they are free to do so, but that has to be done on fair business terms so that all stakeholders have a level playing field.

Paypal blog had some updates on this, am curious to see if they will approve the user comments, including mine.

Feb 11 Update: Some good signs: 1. The money I'd lost (about 10% of the amount) during withdrawal and reversal has been credited back to my account.
2. Paypal blog has published most of the comments without suppressing any. Good
3. Got a prompt but standard reply from paypal helpline that issue will be resolved soon in response to my email
4. looks like an alternative to paypal, but not sure of their India operations. Need to explore.

What to do with money stuck in Paypal account?
As I can see below are some options.
Option 1: Just wait, hoping for paypal to sort out the mess
Option 2: Buy something on eBay
Option 3: Use the funds to do some commercial purchase if feasible
Option 4: Explore legal options if you have the muscle for it

Related: Be an alert Consumer * Policy Change impacts APAC users * Policy change @ Vegetable shop *


  1. I agree I am worried as I too have used paypal for payment against articles etc. I will give it a few days to see what happens. I anyway was planning to buy camera lens from that money so maybe I will hurry up and do so. And yes if someone else offers a similar deal I will move.

  2. Do they still allow withdrawals to Indian bank accounts?

  3. I have a few dollars in my account....thanks for the update Shrinidhi.

  4. Mridula,
    I think they're reversing only recent transactions.

    Hope it won't affect you.

    Need to check. I've promptly opted to withdraw whatever money I had there-so far no error msg-it takes about 7 days to reach bank account. Fingers crossed.

    You're welcome.

  5. I've tried verifying the bank account. It will try to withdraw a small amount so I can check whether it works before I opt to pull it all out...

  6. The process will take a few days I think. I'll wait and see how it goes.

  7. I have not used paypal for any kind of online transfers so far... Didn't knew the implications either, but I feel it would be really harsh on small personal payouts.

  8. I never used paypal..but your article just prompted me to search RBI site for any notification regarding Money Transfer..There aren't any therefore it might be a company policy to look out for frauds...But they shouldn't have done it retrospectively

  9. Hari,
    Yes it takes a few days time, unless they decide to delay/hold it for further long

    Yes, they're free to change their policies, but that should be done from a future date by giving advance notification to all stake holders, not back date it on already completed transactions...

    It is as equivalent as your bank reversing your monthly salary paid by your employer

    this has nothing to do with RBI, just some internal problems of Paypal...

  10. I have the luck of having withdrawn the last dollar from paypal a few days before this happened. Though my fingers are still crossed, as paypal has issued a debit but my bank account doesn't reflect that yet. I think it is equivalent to a fraud to debit money from one's account without account owner's permission. And yes, they had to clarify their stand and provide sufficient notice instead of acting in haste. But I have a feeling that long hands of GoI also may be working in the background.

  11. I withdrew some cash on 28 jan and its still on there in my bank!

  12. TG,
    Your comment is not clear...You mean you withdrew from Paypal and it has reached your bank and is still there?

    Not sure of GoI hands, but it is in their own business interest that PayPal gets this Mess sorted out asap

  13. how come i didnt get this message ? also Ive some money in my paypal acct for stories ..and I havent withdrawn it..let me now check ..thanks for the post

  14. Issue not yet resolved:

    8th February, 8-30 PM

    Just made another call to Paypal customer care and had a chat with Supervisor too. They are having technical issues and developers are working on it. They are telling that issue will be resolved this week.

    Here is the new recording of Paypal Chat:(8-02-2010) 10.1 MB

    The chat with the supervisor has more clarity.


  15. Mahesh,
    Thanks for that update. You've been very helpful


    Good. If that was not processed as a personal payment then it is unlikely to be reversed.

  16. This is a stupid move by paypal!
    I am sure they should have announced in prior about policy changes, especially when it is involving so much of money!

  17. Ram,
    Also the reason for the same is not disclosed...

  18. Hari,

    They stopped I think. My last withdrawal reverted to paypal. I contacted paypal and they said its their internal issue and will sort out soon. It took more than 10 days to get my money back to paypal which I sent to my HDFC bank


  19. saleesh
    Thanks for sharing your experience. Me and few friends also faced similar problems. Withdrawal requests reversed but various fees are charged for both withdrawal and reversal and account is now less by 10% for no fault of ours...


    I've updated the post as well...

  20. This comment has been removed by a blog administrator.

  21. I read in this NY Times article that it is a RBI issue?

  22. I have been looking everywhere for this! Finally I found it on Yahoo.

    Thank you!


  23. If they have stopped personal payments to and from India. then they have to block the option by sender side that he can not send payment in India.

    I got USD 577 in last few days. I have also requested to withdraw money in bank account. Paypal canceled all my withdrawal requests and credited USD 539 and reversed to senders. I got loss of USD 38.

    I got credit of USD 539 instead of USD 577. Even if withdrawal requests are not completed, how can they deduct exchange rate fees even if transactions are not completed and money are sent back to senders.

    Now I have negative balance. And I like that balance will become positive by deducting from credit card.

    Who is saying that paypal is safe way payment method ????

  24. Tamir, I too got 10% less money after withdrawal was reversed, but this was rectified after few days and balance is credited back. Hope the same happens to you.

    I could see paypal taking some interest and initiatives to sort out the mess, including their representatives writing comments at some blogs, updating their own blog and other actions. Hope everything will be alright soon...

  25. India Users can use Xoom for withdrawing money from PayPal to their Local Bank Account

  26. I run a B&B. I was getting deposits for room reservations thru PayPal. Suddenly they returned the money back to two senders. I managed to get over this by changing it to a business transaction account for 'services'.
    I started getting the payments from potential guests, but now I find that they have reversed amounts withdrawn to my bank account back into my paypal account - without my permission. Though later they have also credited my paypal account with about 10% charged earlier - small mercy.
    The big question is when will they allow withdrawal of my balance to my Indian bank account?

  27. HI,
    to send money in paypal there are options like payment sending for goods,services/others and ebay goods.

    can someone tell me if he did face the same reversed payment situation if his sender selected the option services/other except personal.

    does services payments also getting reveresed?

    can someone suggest me on this.


  28. Payment processor "PayPal" (Subsidiary of eBay)has created lot of issues in doing India
    based payment transactions.
    Many people got angry due to irresponsible behaviour such as reversing transactions without
    any prior information. And, lot of discussions were going on in many forums. Read more @

  29. ----------Updates----------
    The latest post at paypal blog admits that the issue is due to RBI regulations...

    Its good to see that Paypal officials are taking some time and efforts to keep users updated, though a clear time frame is still not known...

    QPT, ok thanks for the update. We'll evaluate that

    I understand your frustration. Looks like there's no threat for the money in the paypal account, just that when and how we'll be able to withdraw it is the question

    I've read in few places people complaining that even non personal payments were reversed... Paypal may insist on courier tracking number/shipping address and such proof in such cases..

  30. You people have another option to transfer money online.
    See following link
    Even, freelancing site like suggests to use this.

  31. didn't come across with the need of using paypal in the recent past, but anyway this is a very good and very informative articles that helps lots of small time users in India. great work. and now i'll go and try to explore thanks to Nidhi

  32. I would suppose if you have some money in paypal you could send it to a friend in another country who could send it back to you via western union...just a thought which I'll try out if paypal does not sort things out soon. Really does sound like an India problem...this is typical India gov't behavior - just act against the people without warning, say "sorry" after...and life goes on again. Hope it all smooths itself out soon.

  33. I can help transfer to Indian account from paypal contact me

  34. Recent issues with PayPal withdrawals to Indian Banks & more over payments just randomly being reversed back to the senders will have a deep impact on PayPal's reputation. It raises so many questions like (THIS MIGHT CONTAIN SPOILERS):

    A) Should we trust PayPal in future?

    B) Are they really concerned about our Money?
    ANS: ABSOLUTELY NO, After a long period of two weeks we receive an apology letter stating that “We are sorry we goofed up opps!”? and stuff like “Your money just got sacked since this is nothing serious to us we are just doing a drill of playing a game with your hard earned money”?

    C) Is RBI responsible for this?
    ANS: UNQUESTIONABLY MAYBE, So, Question is why this is happening in India and nowhere else? Question is why we are being kept behind curtains and dark? Question is why Moneybookers and other Payment systems are working but PayPal is not? you just want to exclude the RBI out of this since they are least concerned with us. Everyone failed here! RBI off course you cant expect them to give you a comforting truth so a comforting lie should suffice you! And PayPal Ow man no shit a multinational company failing to inform and notify of an issue of this magnitude. That was an AWESOME combination of pure frustrating, destroying trust & spreading chaos.

    D) So what does PayPal tell us now?
    ANS: “We are sorry, but your valuable to us so please give us another opportunity to goof up and play some more engaging games with your money” and “We just love to make more profits by giving you a pathetic exchange rate”

    D) What now?
    ANS: DTA (Don’t Trust Anyone) Get your sleeves up against them and find your own ways to get paid over any other medium that serves better, communicates better and keep them in plenty. If one fails other should work out.

    Ive let all my clients know about this issue and advised them (in advance unlike PayPal) to switch over to some other Payment system which is reliable, responsible and does the main thing “ACTION” at PAR. The truth will probably be dead and berried RIP about what happened because the shame and disgust they bring upon themselves is apocalyptic now.

  35. Hi all,

    I have the same issue with paypal as I am from India. I had more then $700 balance in paypal and because of the limitation, I was not able to withdrew my fund, and with in a few days more funds will hit my paypal account ( as I am a designer and I’m listed in elance, scriptlance and GAF). Now I want to share the way how I am drawing my Paypal fund in India.

    I opened a Legal Personal US bank account . ( take 10 days to ship my ATM card, PIN and check book ) ( Don’t believe any offer untill its US-FDIC recognize, I have lost money in google search)

    And then I Transfer my PAYPAL fund to My US Bank account ( took 2 minute).
    Now I can withdrew my money from any ATM in my city. (my ATM card is MasterCard Debit card.)

    I opened the account just for nothing ( only $10, for information they will ask you to deposed $200 at the time of opening the account but you can withdrew the amount anytime) and it’s a 0 balance account with an ATM card cum MasterCard Debit card, 200 page US check book. More over my account is insured up to $100,000. Now, Some of my customer wish to paid me directly in my US bank account. As a result there is no extra charges ( Paypal %) between customer and me….

    I am happy that I have a legal Personal US Bank account and NOW I can withdrew Indian rupees without knowing anyone in India :P for More details about the personal US Bank account.

    Best of luck.

    --- Divya

  36. Dear anigalla,

    Thanks for the comment

    Dear Janu

    I guess issue is resolved now and withdrawals are being allowed after one enters proper withdrawal code...


    Ok. How do you plan to help and how do people contact you?

    But I guess issue is resolved


    Don't think it is fair to blame paypal alone. Any legal company would have faced same issue as the cause of problem is RBI guidelines...


    Thanks for sharing your experiences

    All, pls refer paypal blog for latest developments. Now withdrawals are permitted..

  37. DIVYA IS FULL OF CRAP!! That email address he gives is a PPC site he's getting money for if you go thee...find another place to hangout Divya...people need realistic ways to get their money from Paypal


    Orig article at PayPal offcourse you gotta take the pain in the rear to find it your self:


    Hello Zoe,

    Good morning.

    I wanted to make sure you aware of a notification that was sent yesterday to customer’s in India. I have included the notification below.

    In accordance with regulatory instructions, we would like to notify you about a change in our withdrawal functionality in India starting on August 1, 2010. At present you can request for either an electronic or cheque withdrawal of funds from your PayPal account if you are an India user.

    From July 29, 2010 onwards, you will only be able to request for a cheque withdrawal of funds from your PayPal account.

    While we are working hard to restore the electronic withdrawal service, in the meantime, we are bringing this matter to your attention so that you can plan your future withdrawal activities accordingly.

    To request for a cheque withdrawal:

    1. Log into your PayPal account, click on ‘Withdraw’.

    2. Click on the ‘Request a cheque from PayPal’ link.

    3. Enter the withdrawal amount and select your mailing address, then click ‘Continue’.

    4. Click ‘Submit’ to confirm your request.

    In order to help you with this change and until further notice, we will refund the $5 USD cheque withdrawal fee to you for cheque withdrawals made on July 29, 2010 onwards.

    For any questions, please log into your PayPal account and click ‘Contact Us’ at the bottom of the page.

    We apologize for any inconvenience caused from this change in our withdrawal functionality. We will provide ongoing updates to you here. We thank you for your attention and patience as we work tirelessly to resolve this situation as quickly as possible.

    Please let me know if you have any questions regarding this change.


    Carolyn Anderson / Merchant Account Manager
    direct 866-923-3778 / cell 402.960.9871
    fax 303.395.2821
    office hours 7:30 AM – 4:00 PM CST Monday – Friday

  39. A new fact about Pay Pal :

    I applied for a charity account with Pay pal because its free and supported by vbulletin software for payment subscription, I have all the documents like NGO Registration certificate, Memorandum of Society, Society PAN card, and the Bank details , bank details were verified by the Pay Pal by depositing amount of Rs. 2 and 40 paisa, after submitting all the document as per said in their website and in their emails, they denied me for the account, just because they have no tie-up with India regarding charity account, what the hell is this, why the pay pal people should not mention at the time sign up process. I have wasted around 1000/- rs in doing fax to pay pal and after 4-5 days they denied.

    Don’t apply for a charity account with pay pal if you are living in India. Just wastage of time and money.

  40. This is the official Paypal India Blog Page . For Indian webmasters Paypal is a recurring headache.
    I've come across some Paypal negatives at this Paypal and 2Checkout comparison page .
    Better go with Indian companies.

  41. Thanks all for your comments. Couldn't reply earlier... Guess all sorted out now

  42. Paypal India Update:

    With effect from 1 March 2011
    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.

    2) Export-related payments for goods and services into your PayPal account may not exceed US$500 per transaction.

  43. Thanks Anon.. got that mail...

    its more due to Paypal's unwillingness to pay interest and comply with reporting regulations

  44. My Solution to Paypal – RBI issue.

    I am Suresh Nair from Kerala. I have been using Paypal for the last 8 Years. They are one of the best payment processors. I cannot compare paypal with other payment processors like clickbank, 2checkout etc, because most of our sales are processing by Paypal. I have provided 2 payment options and 95% of them are choosing Paypal. So I cannot think about an alternative. The recent issues are because of ‘outdated’ guidelines from RBI. First of all, paypal is not a bank but a payment processor. So they have to make new rules/guidelines for payment processors.

    2 months back I found a real solution to this problem: I became an NRI and all the problems were solved. I registered a business in Malaysia and I have a Paypal account which is attached to my Malaysian bank account. Then the fund will be transferred to my Indian (NRE) account. No worry on paying Income taxes here in India since I am now an NRI and NO income tax in Malaysia for foreign income.

    So Paypal doesn’t suck, but RBI sucks!

  45. Thanks for sharing your thoughts Suresh Nair... for ordinary residents it (becoming NRI) may not be possible though


Appreciate your efforts and interests to comment. Comments may be moderated due to increased spam. Will ideally respond to comments within few days.Use Anonymous option if you don't wish to leave your name/ID behind- Shrinidhi

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