How PayPal transfers money to Indian Banks?

September 1, 2008 at 3:46 pm 5 comments

Whenever I get funds transferred from foreign banks to my bank account, I get a call from my bank asking for the reason why am I getting foreign exchange. I, then have to explain them that I am getting this from my client for whom I did some software development.

Recently, PayPal added a new feature using which I can transfer my PayPal balance directly to my Indian bank account. I thought it was really cool of PayPal to add this feature and this would make both my client’s and my life easier. Therefore, this time I asked my client to send me the money through PayPal. I got the money into my PayPal account and then I used the new feature to get the money into my bank account. After 3-4 days I got the money into my account, but this time I never got a call from my bank. I was wondering why and then decided to find it out.

PayPal recently started its own India development center in Chennai, India. I think it registered itself as PayPal India Pvt Ltd. This gives PayPal an ability to transfer money to any bank account in India in Indian Rupees (INR). It really doesn’t have to get individual PayPal balances (maintained in USD) transferred to corresponding bank accounts.

Here is what I think PayPal does. It gets huge amount of money from U.S. into its India Bank account with lowest exchange rate possible. Whenever a user wants to transfer his PayPal balance to his bank account, PayPal transfers from its own bank account in India to the users bank account. No foriegn exchange hassel and it can be faster.

So the next question would be how does PayPal makes money with all this? It charges users foreign exchange fee even when its actually not transferring users money from U.S. The porblem is this fee is pretty hefty when compared to others. There is almost 10% – 15% difference in the exchange rate between an Indian Bank and PayPal.

Its pretty smart of PayPal to do this. It makes lots of money with this strategy and people in India will definitely use this feature because it makes their lives easy. But I think 10% margin is a huge and I will not use this.

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Entry filed under: Food for thought. Tags: .

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5 Comments Add your own

  • 1. Ritesh Narayanpur  |  October 6, 2008 at 1:41 pm

    Hey Mithin, I think that PayPal is a really hassle-free way to transfer foreign exchange into my Indian bank account. But as u rightly said, they charge a hefty sum as their commission and their exchange rate is poor. As of now, no other go for me. Hopefully things will improve in future.

    Reply
  • 2. Belmos  |  December 23, 2008 at 10:20 pm

    Can i transfer money from paypal to my IOB account. Please help me …….

    Reply
  • 3. mithin  |  January 8, 2009 at 10:19 am

    @ Belmos: Yes, you can tranfer money from PayPal account to any Indian Bank account. All you need is the bank account number, name and the IFSC code.

    Reply
  • 4. Datta  |  February 6, 2009 at 1:47 pm

    Dear sir

    Thanks your information is very helpfull

    i want to transfer my paypal amount into sbi india..bank account

    but when i entered the information of bank account no.or any

    he ask for IFSI no.

    I cant understand that where i found this IFSI No.can u provide a solution or answer for it

    Thanks

    Datta

    Reply
  • 5. Datta  |  February 6, 2009 at 1:48 pm

    Dear sir

    Thanks your information is very helpfull

    i want to transfer my paypal amount into sbi india..bank account

    but when i entered the information of bank account no.or any

    he ask for IFSC no.

    I cant understand that where i found this IFSC No.can u provide a solution or answer for it

    Thanks

    Datta

    Reply

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