Speculation about PayPal’s suspension of personal money transfers into India is rife on the blogosphere.  The most intriguing idea came from PC Magazine.  They noted that the Reserve Bank of India has recently cracked down on money laundering.  India’s central bank may be worrying that people are using PayPal for nefarious purposes.  In his PayPal blog, Anuj Nayar makes the following statements:

“1. Why did you suspend local bank transfers and personal payments to and from India?

We temporarily suspended these services to respond to enquiries from the Indian regulators, specifically questions on whether personal payments constitute remittances into India.

We’re working with the regulators and our bank processing partners in India to get this resolved as quickly as we can. We realize that this is causing considerable inconvenience to our customers and I want to reassure you that this is a top priority for the leadership at PayPal

2. When will personal payments be turned back on?

The regulators recently let PayPal know about revised licensing rules that we are now actively engaged in securing. Personal payments to and from India will be suspended for at least a few months until we fully resolve the questions from the Indian regulators.”

For those who don’t want to click the link above, remittances are simply transfers of income, usually from foreign nationals working in a country to family or friends in their home country.

Again, the mystery deepens.  Remittances are generally good for an economy.  Why would the Indian government worry about them?  Interestingly, the Economic Times (part of IndiaTimes.com) also speculates that money laundering is the real problem.  Stay tuned.