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How PayPal’s Paper-Check Payments Will Affect Lives in India? [FAQ]

Posted: 27 Jul 2010 11:04 PM PDT

PayPal Reserve Bank of India RBI Fight How PayPals Paper Check Payments Will Affect Lives in India? [FAQ]

This morning, like most of Indian Paypal Users, I woke up to read an email by PayPal saying,

…From July 29, 2010 onwards, you will only be able to request for a cheque withdrawal of funds from your PayPal account…

Few lines down the lane the said electronic withdrawal option will be disabled for Indian users. Normally, PayPal charges $5 as fees for withdrawal by check but in this case, that fees will be refunded.

Their official newsletter, like other official newsletter leaves many questions unanswered and below are my own answers to some questions I received from fellow bloggers and publishers.

Which currency PayPal use while issuing a check – USD or INR?

I haven’t used withdrawal by check method but except Google AdSense, all paper-checks I received till date are in USD.

So I am sure that PayPal checks will be in USD.

How many days will it take to clear PayPal Checks?

I spoke to our corporate account representative at HDFC and according to her foreign currency checks normally takes 21 days to clear! Also added is 5-7 days time in postal delay.

I personally think, if bank through which PayPal will be issuing checks have branches in India your check might be cleared soon. Of course, you must have bank account in same bank’s Indian branch or else your check will face inter-bank clearance delay.

Do Indian banks charge for depositing foreign currency checks?

Yes. Most banks do. Processing fees (or service/other tax) can vary from bank to bank. Also, it may depend on transaction volume. Moreover, it may or may not reflect in your account statement as it can be added directly to the currency conversion charges only.

Example: To further clarify this, let us assume you are depositing a check of 100USD in Indian bank and you read currency conversion rate is 1 USD = 47.00 INR. Now, Bank-A might give you flat currency conversion rate of 45 and deposit 4500 INR in your account. Another bank, Bank-B, might give you better currency conversion rate of 46 but will charge 100 INR as transaction fees and 10.3% service tax on it. This way Bank-B will deposit first 4600 INR in your account and then will deduct 103 INR as fees, leaving 4497 INR in your account.

I am not concerned with this part much. PayPal also applies currency conversion and processing fees during electronic withdrawal. If you compare final currency conversion rates between paper-check transfer and electronic transfer, PayPal charges more on electronic withdrawal.

This must be a temporary issue as PayPal is not charging $5 as check-withdrawal feed. Right?

Only god, Government of India (specially RBI – Reserve Bank of India) and PayPal officials know if this is temporary issue or not.

PayPal is not charging $5 because as any good corporate house, it’s not wise to charge your customer for an option when you are not giving them alternative. Plus, even if PayPal decides to bear $5 fees, they will be already earning much more than that from each publishers as their per transaction fees!