Paypal curbs in India hassle thousands of small users

INDIATECHONOLINE OPINIONBack in the heyday of pre-digital, wet film photography, Kodak used to sell processing-charge-prepaid Kodachrome film all over the world. The carton specified the return address in each country, where customers could send their exposed roll, to get it processed and returned at Kodak’s cost, as a set of mounted transparencies. So you could buy and shoot a roll, locally. while you were on holiday in Singapore, but could send it to Mumbai, for processing after returning to India. All very convenient – except for an embarassing note tucked into the the enclosed piece of paper, which listed the global return addresses for processing. Beside the Mumbai address of Kodak, there was an additional instructional in bold type: SEND by REGISTERED POST.
There we were,  publicly acknowledged to be a nation of thieves, where the postal system could not be trusted to deliver a roll of film, unless the sender paid almost double to have the packed registered and the delivery recorded. We lived with this ‘ we are like that only’ attitude of a second-rate state for decades – and it is only in this millennium that simple commercial operations like these have begun to assume the look and feel familiar to the rest of the civilised world.
But every once in a while, ‘babu-dom’, long repressed in the post-Manmohan Singh years of so called “liberalization”, strikes back, reels of red tape in hand, eager to assert its divine right to hassle the Indian taxpayer in every which way it can .

For some years, the government has rolled back its harsh regulation of Indians converting small amounts of money to any other foreign currency, when they go abroad or buy something abroad. The days when you applied to the Reserve Bank of India to be allowed to carry pathetic amounts of foreign currency like 500 or a 1000 dollars which is all they allowed you for a week’s business trip, are now just a bad memory. The ominous letters “BTQ” or Business Travel Quota is rarely invoked by your travel agent today when you ask him to give you US$ 1000 in travellers cheques. In any case, all Indian residents have the option fairly simply, to upgrade their credit cards to an international Visa, Mastercard, Diners or AmEx card. Manmohanomics has ensured that most trivial foreign exchange transactions for genuine purposes go below the radar of strict monitoring.

So what’s with Paypal that has the RBI suddenly waking up like Kumbhakarna, the sleeping giant in the Mahabharata ( or should we say Rip Van Winkle in the spirit of globalization?) to order its key operations closed in India?
The ‘mandi’ or market is now global not just for the big IT companies in Bangalore and Hyderabad – but for the rest of us – and we have to thank services like Amazon and eBay and ITunes for this. We can buy things like books from abroad and have them shipped to our homes in a week or less, all just with a few clicks of the mouse. Yet, many of us are still uncomfortable sharing our credit card details with agencies abroad, though we are reconciled to doing this when buying train or air tickets from Indian agencies. And then there are thousands of fledgling entrepreneurs, for whom the Internet has come as a lovely lifeline and an umbilical that allows them all of a sudden, to sell their products around the world, rather than just in the ‘mohalla’ or neighbourhood. For all of them, PayPal, the Web’s leading payment gateway and since 2002, a service from e-Bay, the world’s largest business to customer e-commerce operation, has been a Godsend. More than 78 million users in 190 markets use it, across 24 currencies, to make and receive payments for goods and services. PayPal lets its users do such transactions using their normal credit cards – but after inserting PayPal as a sort of screen, that shields their credit card details from the guy at the other end. They charge their credit card to pay in PayPal units. The recipient receives these unit, then encashes them through his other own banking system.
PayPal users in India over the weekend, discovered that when they tried to encash their PayPal credit, the banks refused to honour these remittances. Imagine the plight of a small business in Kollam or Kanpur, whose living comes from meeting tiny orders from abroad where the payments are in tens or hundreds of dollars. Suddenly the money supply for such people is blocked without warning.
In a blog posted by him on Sunday, PayPal’s Asia Pacific Business head, Arshad Irani, apologises to his Indian users, but says the stop was ordered by the Indian government and applies only to personal and not commercial transactions, because apparently the Paypal service was not properly registered. Enraged users, say all types of transactions are being stopped by overzealous Indian bankers.
The problem is unlikely to be resolved any time soon – so in effect, PayPal subscribers in India are left high and dry for no fault of their own. Nobody, least of all, RBI stopped them from signing up with PayPal. Don’t the babus in RBI and the Finance Ministry see all those thousand Indian sites which carry a PayPal payment option? Why have they woken up after all these years – and why of all users, have they targeted the smallest users – the individuals who have no business interest, who just want to sell or buy something on e-Bay or any other e-biz site? Remember, even if you use PayPal, you have to encash your credits through the bank – so there is in any case, what Mr Chidambaram was so fond of calling, an “audit trail”. What more do they want? If there is a technicality on which PayPal has faulted, surely, it can be sorted out ‘offline’ by PayPal and RBI, without bringing the whole system down for Indian users?
On the  one hand, the government trumpets its commitment to micro banking for the ‘unbanked’ of India. On the other, it tramples over innocuous micro banking services that Indians – users all over the world --enjoy. Internet is seen worldwide as a crucial tool for empowerment in the hands of the disadvantaged. Here, its most basic services are We mouth the same pious sentiments here; but its most basic, people-friendly services are viewed with suspicion, without sensitivity to their potential.
Did we say innocuous micro banking? We take that back – and wait in breathless anticipation to hear government’s explanation for closing the PayPal pipe in India, at least for now. We won’t be surprised to have it explained as yet another measure in our fight against terrorism.

Meanwhile curb your enthusiasm for that great piece of music you wanted to buy from the Net – or go back to old fashioned , uncool ways of paying for it.

This item appears in slightly  edited form at

Feb 17 2010