Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

At Pragati: Open Up The Rupee

Last month, I wrote for Pragati on issues with Paypal recently and why the real solution is to Open Up The Rupee:

PayPal, the company that pioneered payments and money transfers on the internet, recently announced a change in the payment system for Indian residents, by setting a limit of $500 per transaction. Furthermore, users cannot use money credited to them to directly buy goods or services—they will have to get the money paid into their bank account first. PayPal said this change was made in order to comply with Reserve Bank of India (RBI) regulations and, regrettably, did not give any further details.

Many Indians use PayPal—shoppers who buy books or software online, electronic retail entrepreneurs, and freelancers who are paid online for ad hoc or small projects. Typically, they would receive and store money at Paypal, and use it to pay for goods or services, or to make small donations. With these new changes, they must withdraw any received money immediately so the intermediation costs go up—users can still pay others through PayPal with a credit card, but that means paying fees at both ends of the transaction.

The limit of $500 per transaction hurts the bigger players who heavily relied on PayPal as it is trusted by their US customers. Now they have to tell customers to split transactions into chunks of $500—a process that is tedious and appears unprofessional.

The new regulation was announced in a circular by RBI, which stated that the Foreign Exchange Maintenance Act (FEMA) laws do not allow for storing of export proceeds abroad. PayPal is therefore required to put all such money into a pooled account at a “Category 1 I-Bank”, and then transfer it to the exporter’s bank within seven days. The seven-day limit is the RBI restriction, wherein interest needs to be paid above that time (in addition, you have to be a bank); PayPal is required to report in detail all transactions over the $500 limit.

(Read the full article)

Do let me know your thoughts!

  • Siddharth says:


    All valid arguments you have got. In my strong opinion ALL the restrictions are in-place to encourage corruption and etc. (directly or indirectly because it suits bureaucracy+politicians)

    We still ahvent come out of license-raaj till now. It still exists in restrictive ways.

    The fundamenta; problem with MP's debating on these matters are way too old to adapt with modernity changes. Exceptions exists, but number do not counter an effective force.

    So unfortunately we will ahve to wait till all these wheel chair bound supplemented by oxygen, Politicos die and we stand a better chance for young replacements!

    P.S. I have no problem with grey ageing of like that, as a matter of fact I would like these beyond retirement age politicians to be sitting in political party's think tank committes and not in the Parliament seats! Thats my point. We need wisdom to GUIDE not to DIRECT.

    As a non-resident I have been through lots of hooplas and some of it you are aware of, in regards to RBi policies. Nothign helps. Why does hawala still exists? Why does betting in India still exists and flourishes? Only because of GOvt restrictions. I say make betting legal and tax the transactions.

    Indian customs still say while travelling you cna carry only Rs5000/- or something like that physically. To be honest what you get in this meagre amount?

    enough rant.

  • Siddharth says:

    >On cynical note,
    the change expectations are guaranteed with disappointments, as these are the same government attitudes which are competing with each other to reward cricket members outrageous, obscene, unfair amount out of public purse and these are the same attitudes which scandaled Kargil war widows.

    What to expect from such attitudes?