PayPal Suspends Payments To India

PayPal has suspended personal payments to and from India.

The online payment service did not give a reason for the suspension, or say how long it would last. Along with personal payments in and out of the country, PayPal suspended transfers to local banks in India.

Anuj Nayar, director of global communications at PayPal, said in the company's blog over the weekend that the suspension would continue while it works with "our business partners and other stakeholders to address questions they have about the service."

PayPal customers could still make commercial payments to India, but merchants could not withdraw funds in rupees from local banks.

PayPal apologized to its customers for any inconvenience and said, "We're trying to resolve the situation as quickly as possible." The company promised to provide updates.

The suspension is expected to have its largest impact on the thousands of Indian freelance developers paid via PayPal for Web design and software development. Many of these freelancers use personal accounts to receive money from clients.

PayPal's action may be related to new international banking reporting and verification requirements instituted late last year by the Indian government, business bloggers have speculated. The crackdown is to prevent money laundering, a major banking problem in India.

PayPal has been encouraging the use of its service to replace cash and checks used, for example, to pay consultants, rent, and employees. The company last November lowered pricing for use of its service within third-party applications that make such payments possible.