RBI Open to Increasing Limits on International E-Commerce Transactions!

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Reserve Bank of India (RBI) is open to looking at increasing the limit on international e-commerce transactions. "If the system wants the limit to be enhanced, that is something that we are positively inclined to look at" said G. Padmanabhan, Executive Director, RBI, at a CII event. Currently the limit is $3,000.

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G. Padmanabhan reportedly also said that the limit was set in consultation with PayPal and up to 99% of such transactions were below $3,000. Payment gateways like PayPal are used by freelancers, developers, sellers on portals like eBay and other professionals who make a living online, servicing domestic and international clients.

For example in the current scenario a professional working as a website developer may be unable to receive a single-transaction remittance from an overseas client for an invoice amount that is more than $3,000. If RBI decides to increase the limit on international e-commerce transactions, independent professionals and businesses will potentially be able to expand their income generating models.

Earlier in 2011, PayPal ceased to be an online wallet and payments for goods and services could not exceed $500 per transaction under a new set of guidelines issued by RBI. Prior to this, PayPal account holders were allowed to hold balances in their accounts, potentially using funds from export related remittances to make purchases or payments. This meant murky waters from a taxation perspective.

Commentators looked at the restrictions and the cap of $500 for export related remittances as a regressive step. In October 2011 it was reported that RBI relaxed the upper limit on e-commerce transactions from $500 to $3,000.

Payment gateways especially PayPal are a basic necessity for many small online businesses. Apart from full fledged business setups, many individuals including students, moonlighters and full time professionals also depend on PayPal to receive remittances for the services they provide to overseas businesses or the goods they sell to international buyers. E-tailers like eBay heavily depend on PayPal to service transactions between buyers and sellers.

In the last decade the internet has become more than just a place to access information, facilitate communication and a mode of entertainment. As more number of Indians use the internet to make a living, a progressive and consistent approach to policies and framework will be welcomed by the online business community.

  1. Vishal B says

    At least some light at the end of the tunnel. If RBI wants to remove the limit, do it within 2012.

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