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Why Paypal India is Shutting down in India: Issues Explained

The decision to shut down Paypal India’s domestic operations amid digital transactions are hitting new records every month may come as a surprise. Although Paypal has not disclosed any solid reason for exiting the Indian domestic market but many theories are going around.

Indian users who happen to transact only within India are very least concerned about this news because of the very limited spread of Paypal in the domestic market. However, if you are doing any kind of international transaction, you have probably seen that almost every merchant around the world uses PayPal as their payment gateway. Almost 98% of business who allows overseas transaction uses PayPal. Being free of cost is the major advantage associated with PayPal. `

Why PayPal India Failed?

The could be two reasons for PayPal to exit the Indian domestic market. The first reason might be the RBI guidelines which PayPal unable to cope up with. Secondly the emergence of one of the most successful payment gateway UPI.

paypal india

Unified Payment Interface(UPI) is the payment system developed by NPCI and practically at the same time when Paypal was entering the Indian market. transaction through UPI went like a rocket because of its user-friendly transaction. Even laymen can use UPI which required the only bank linked mobile number for the transaction.

Also read: Amazon Prime Gaming is Launched in India for Free to Prime Members

RBI guidelines Which PayPal India couldn’t Swallow?

The conflict of PayPal started even before it planned to come to India. Back in 2011 RBI banned all kinds of transactions through PayPal in lieu of violating the Foreign Transaction Act 1999. Later this issue was sorted out through mutual decision. In 2016 when the Indian digital market was booming PayPal planned to start their domestic business in India.

When PayPal actually come to Indian they faced many banking-related issues. As per RBI PayPal was not eligible to do business in India as per the term they do business internationally. RBI has rejected PayPal’s business approval by showing that PayPal does not hold a banking license. After long term discussion and hassles both RBI & PayPal settle on terms that enabled PayPal to run their operations in India.

RBI terms were:-

  • Every Indian user who registers on PayPal has to provide govt. approved PAN card.
  • PayPal being a nonbaking institution can’t hole users’ money for more than 24hrs. If the user’s transaction is not settled within 24hr the money has to be auto withdraw to the user’s bank account.
  • Users can’t add the amount in PayPal India like they do in PayPal global version.
  • A single transaction of more than $10000 was not allowed.
  • Inter-country payment with PayPal India was not allowed. This is because RBI imposed two-factor authentication for all payment app used in India. As per global standard single-factor authentication is followed for any kind of transaction. So practically if you are trying to initiate an overseas transaction your transaction will fail because of invalid two-factor authentication.
  • Only Debit/Credit cards allowed for paying through PayPal. Again Indian debit/credit card is secured by 2-factor authentication so you can’t use for international transaction.

Final Thought

Due to these RBI terms and stiff competition from UPI PayPal India decided to shut down its domestic services. Although they will be offering and strengthening the international service to Indian users. As a normal user, it doesn’t affect much as the domestic transaction was barely done by PayPal. But the International transaction is no doubt dominated by PayPal and it will be in the future also.


Nitesh Rajput
Nitesh Rajputhttps://www.techscanner.in
I Love technology and the way it is transforming our lives, call me a geek!! Apart from that, I spend my time playing games, watching movies & most importantly the Painting. Reading books is one of my best sources of inspiration.
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