martinibuster - 8:07 pm on Feb 10, 2010 (gmt 0)

From the NYTimes [nytimes.com]:

"Providers of cross-border money transfer service need prior authorization from the Reserve Bank under the Payment and Settlement Systems Act," a spokeswoman for the Reserve Bank of India... said in an e-mailed response to questions. "PayPal does not have our authorization."

On the PayPal side, here is what they had to say:

Anuj Nayar, a spokesman for PayPal, said in an interview that... People and companies in India can still receive "commercial" payments for goods and services, but they are unable to move money from PayPal into their bank... It may take several months, the company said, to resolve issues over personal payments with Indian regulators, but it hoped that customers would be able to withdraw their funds to Indian banks within days.

Official response over on the PayPal Blog [thepaypalblog.com]:

The regulators recently let PayPal know about revised licensing rules that we are now actively engaged in securing. Personal payments to and from India will be suspended for at least a few months until we fully resolve the questions from the Indian regulators. Customers should be able to withdraw their funds to a local bank within the next few days. In the meantime, we’re going to restore the money into the PayPal accounts of any customers in India who have initiated a recent withdrawal, so they know that the money is safe in their accounts. Customers will also be reimbursed for any withdrawal fee charges.