If you an Indian citizen and you surf internet a lot or even thinking about purchasing something from an foreign or international website, you have probably seen that almost every merchants around the world uses PayPal as there payment gateway. No matter what is the location of the business almost 98% merchants uses PayPal. The reason behind this is PayPal is free of cost and many people has working paypal account as it is around in the market for a long time. But as “Pay with PayPal” is like the easiest payment method in most of the continent around the world, in case of India, “Pay with PayPal” almost means you can’t purchase this product, at least for most of the general users. Let me explain why Idian face this issue and in next 7 minutes you will understand why you face this and how to get rid of this issue.
Why PayPal fails in India?
Well the main and primary reason behind that is because of Indian Central Bank or more precisely Reserve Bank of India (RBI). RBI has some set of rules which they have forced on PayPal so that they cannot operate in India like the way they operate in most of the places in the world. Due to this special set of rules PayPal is unable to provide their normal service to the Indians.
Why RBI does this?
RBI believes, it is one of the finest financial institution in the world and moreover I think RBI wants to show the world that they are different from the other international financial institutions. But as per RBI they have set forth these rules to protect Indians from money laundering issues (which still occurs like Sardha Scam in West Bengal), to be ensured that no one can evade the Tax and specially for security reasons.
PayPal India History
When PayPal first came to India to they have faced many banking related issues with RBI and Indian Government. As per RBI PayPal was not eligible to do business in India as per the term they do business internationally. RBI has rejected PayPal business approval by showing that PayPal does not hold banking license. As per RBI and banking rules in India, an authority or institution is only allowed to HOLD money to them if and only if they hold Indian banking license, which PayPal don’t. After a lot of requests and hassle RBI and Indian government give some terms to PayPal by saying that if they want to do business in India they have to follow these terms and these can’t be violated by any reason. The terms were
- PayPal can’t hold anyone’s money for more than 24hrs.
- No one will be able to add funds in PayPal India account.
- All amount needs to be auto withdrawal after 24hrs.
- Every Indian user needs to provide PAN no. in their account.
- More than $10,000 in single transaction is not allowed.
- Can be used only for receiving or paying to non-Indian users.
- Inter-country payment within India are not allowed.
- Only Debit/Credit cards allowed for paying through PayPal.
- No use can use their received PayPal balance to purchase something else using PayPal. Payments are only allowed through cards.
Due to these terms, PayPal has to disable most of their functionality for Indian users. Because if they didn’t do that, then they were never be allowed to do business here in India. In fact they money received by all PayPal Indian users has been auto withdrawal to their respective back account after 24hrs. from PayPal’s Indian bank account which is maintained by CITI Bank India.
What about paying through PayPal?
After RBI has introduces 2 layer of authentication in India, most Indian debit and credit card has been restricted to use only through those websites which allow 2 layer of authentication, first layer is proper card information and CVV code and the second layer is 3D Secure Pin or Verified by Visa code, which has been generated by the card issuing authorities to cope up with the government rules.
Now this is great for general Indians who never even thought about doing international transactions and only make purchase within India using Indian sites like flipkart, snapdeal etc. These websites uses Indian payment gateway which allows 2 layer of authentication, but most of the International payment gateway be it PayPal or Google Wallet etc. allows normal 1 tire authentication system.
Now this is the place where the collision happens. If you try to purchase international goods from an international website using international payment gateway but provide Indian card which only authenticate payment when the payment gateway has 2 layer of authentication, you will almost become mad just to understand why your card is not working.
Is 2 layer of authentication really more secure? It’s not like that. It’s more like keeping money in a wallet because of it is more secure. 😀 You see you can keep money in your pocket too if you, but govt. has strictly rules to use wallet. Infact there is a good reason behind that too. Most of the people in India don’t even have a bank account and those who have doesn’t have this much knowledge about international transactions and security of their cards.
Like do not to share card number, expiry date, CVV code, ATM Pin, 3D Secure Pin or any kind of password with anyone except himself. So, they easily became victim of cyber theft. So it is good for those knowledge less people.
So, what’s the solution then?
In the banking race there are few banks who does allow international usage of their card, if you place a custom request to them. After you place the request, these banks removes the barrier of your card which is not allowing it to be used internationally.
I’ve written a post about PayPal and Google Wallet Indian debit cards support especially about the banks which allow international cross currency transaction. So visit that post to learn more about those bank and their cards.
Can’t we use virtual cards?
Well, this is one of the common thing you might heard in most of the blogs out there and they might suggest you to use Neteller or Entropay cards for doing international transaction. But here is the catch and the reason why I don’t like them and don’t suggest anyone to use them.
First of all these virtual card companies have a minimum upload amount. Let’s say it is 20$. Then if you want to purchase something which is worth 5$, you have to first upload 20$ in your virtual card to make it work. At the time of payment you will be charged for the currency conversion rate (INR -> USD) too. Now when you try to pay 5$ you find out they have again charged currency conversion rate on your virtual card if the base currency of the site in EURO. Now after paying 5$ rest of the amount will stay with that card unless you purchase anything else. Also you won’t get interest on this card amount.
Now if you world have used actual physical card to pay the invoice, you have charged for currency conversion once and also it only take the amount listed in the invoice. Rest amount will stay with you bank and you get interest on it.
Secondly most of the popular merchants has stopped allowing virtual cards in their payment gateway and only allowing actual physical card. So in future, your virtual card might not work anymore.
Though we have so many banking restrictions to follow, still there is always a way out to get what you want. It’s up to you if you want to get it or not. So, for now on, stop searching for tricks about how to do international transactions and read this article about PayPal and Google Wallet Indian debit cards support to know more about the cards that allow international cross currency transaction.
What do you feel about these RBI rules? Do you really feel that these rules actually keeping us safe or they are doing some financial experiments with the citizens? What is your view about Indian banking system stopping international payments? Let me know in the comment section below.
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