Paypal payments and RBI rules making it difficult for SME’s.

Leave a comment

  • Sharebar

Paypal as a payment gateway has been a lifeline for many small and medium enterprises/Freelancers over the years in India. Most of the payments from clients to vendors were routed through paypal, which was like a boon for Indian Industry and Freelancers.

Last couple of years RBI (Reserve Bank of India) has started poking its nose into Paypal based transactions, which has created a huge confusion and uncertainty among Indian SMEs.

Last year there was some directive from RBI which created lots of confusion in SMEs mind. As the directive was not clear, some interpreted it as they will be required to get an IEC (Import Export Code) to receive money to their bank accounts from Paypal. Transaction from paypal were stopped for sometime last year as Paypal Indian officials were also not clear about the new directive. Many companies started applying for IEC. Later there was an announcement from Paypal that IEC was not mandatory, companies would require to define a “Purpose Code” to do the same. And the service was resumed in India, with “Purpose Code” mandatory while transferring money to their bank account from paypal. It was breather for Indian SMEs.

Now again this year RBI has come up with new directive. According to new directive, beginning March 1, 2011, 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 seven days from the receipt of confirmation from the buyer in respect of the goods or services. Also Export-related payments for goods and services into your PayPal account may not exceed USD 500 per transaction. For any transaction more than $500, you can not use paypal service, you need to find some other alternatives. Also you can not use paypal for domestic transactions. This has again become a big dampener for Indian SMEs. Now companies are not really sure about the paypal fate in India. They are not even sure what will be the next step of RBI. So companies have started looking for alternatives.

What do you think are the other options for SME’s???

About Anand Agarwal:
Co-Founder at EZMove

Leave a Reply