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Online payment makers, what is the background for PayPal suspending services in India?

News: Online payment service provider PayPal has put some of its services in India on hold temporarily, and is reversing funds requested through PayPal India, according to reports. http://www.zdnetasia.com/news/internet/0,39044908,62061046,00.htm What is the reason and what are the implications for sellers and customers transacting online, due to sudden suspension of services? Please share your perceptions

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1. Poondi sir, I just give cut and paste info from websites on the subject, which gives a picture of the raging anomaly involving a major service provider on internet: In the curious case of PayPal blocking and reversing payments to and from India, facts have been remarkably thin on the ground. The eBay subsidiary just says it's "really sorry," but just doesn't give any insight into what's going on. Anuj Nayar, Global Communications Director for PayPal, simply said that personal activity involving Indian accounts was halted beginning January 28 and that the company is working quickly to resolve issues and resume payment and other transactional processing, adding, ”… we’re sorry for any inconvenience this may cause." The move may be related to the Indian government's crackdown in November 2009 on international banking transactions. The government instituted new reporting and verification requirements on all banks and financial institutions to prevent international money laundering, a plague within the Indian financial community. The suspension is likely to affect thousands of small Indian freelancers, including IT programmers, web designers and writers, who use personal rather than business accounts to receive payments from customers. Many of these Indian freelancers are lashing out at the PayPal announcement and its lack of detail and information. Comments of clients culled from Blogs: .. and even after the entire episode, there is nothing official put up on the PayPal website, not even on PayPal India - https://www.paypal.com/in, as you can clearly see yourself. Calls and emails to PayPal customer service are only producing vague responses, and we still do not have any clue as to when the money will be in. I personally have experienced reversals of my payments as well as non-receipt of withdrawals made to my bank account….. Paypal hasn't given any explanation to this behavior other than they're looking into it. Although Paypal claims ... that payments made for 'Services' are not being reversed, this is not true. All payments not made for 'Goods' with a shipping address have been reversed — in fact, ... Paypal ... tells the Indian sellers to encourage their clients to lie and claim that they're paying for goods with a shipping address instead… Kai Hiwatari thinks he has the answer: This is due to some change in the regulations by the Reserve Bank of India (RBI) regarding offshore money transfers. ... RBI is demanding some documents form PayPal to make them eligible to transfer money to and from Indian Banks. Apparently PayPal hasn't been able to furnish those documents. And iammani alleges shady tactics: Of course. Paypal has to be registered with the RBI to make forex (foreign exchange) transfers. Every time someone converts rupees in dollars or vice-versa, the source and destination of transfer and reason have to made available to the RBI.... The problem is Paypal doesnt want to be regulated as bank but wants to be able to perform what banks do. And this does not go well with the RBI. Keith Dsouza goes ballistic: … I ask every other user to withdraw their money and boycott PayPal, boycott PayPal forever. Never accept a payment in PayPal, if you think that this is the last time those.. did this, you are wrong, if someone really cared about you and your money, they would first tell you about it. Submitted by A D on February 9, 2010: Not only the payment to India has been suspended without prior intimation but the transfer initiated by me on 4 Feb 2010 was reversed on 5 Feb 2010 (money was sent back to sender) and a charge of USD 120 imposed on me for no fault of mine, leading in a negative balance. The customer care does not have any answer. They need to do something fast and compensate its customers for the inconvenience, especially for suspending payments without any advance intimation and imposing illegal charges. Submitted by Fatman on February 8, 2010: If it is not clear to anyone, PayPal and eBay are private companies. If you want to 'play in their sandbox' (i.e. use their services); then you have to play by their rules. It is that simple. There are other ways to send money that do not involve PayPal. If you choose to make purchases through eBay, then avoid PayPal and use a credit card. Remember, eBay owns PayPal, so those who buy things from an eBay seller and use PayPal enrich eBay twice (eBay fees and PayPal fees). Vote with your wallet!! Submitted by Dave on February 8, 2010: I'm not affected by this in the slightest, but I am bothered by two aspects: the complete lack of explanation from PayPal, and the trite "we're sorry about any inconvenience." Any service provider should know by now that customers will be much more forgiving when an honest explanation is provided about a problem. Major clippings from : http://blogs.computerworld.com/15549/paypal_reverses_india_payments_heres_why