After suspending personal payments in India, making PAN Cards compulsory and putting a lot of Indian business owners at hassle in February, PayPal is now going to stop Electronic Withdrawals or Direct Deposits in India.

A new announcement from PayPal said it would not allow electronic withdrawal of funds from respective PayPal account from August 1. And now, the only option for electronic withdrawal of funds would be through cheque and they are also waiving the withdrawal fees of $5 for every check until the electronic transfer service is restored. Some sources said that these rules are because of problems it is having with RBI(Reserve Bank of India) – India’s Central Banking Authority.

The official note from PayPal to Indian users says:

In accordance with regulatory instructions, we would like to notify you about a change in our withdrawal functionality in India starting on August 1, 2010. At present you can request for either an electronic or cheque withdrawal of funds from your PayPal account if you are an India user.

From July 29, 2010 onwards, you will only be able to request for a cheque withdrawal of funds from your PayPal account.

While we are working hard to restore the electronic withdrawal service, in the meantime, we are bringing this matter to your attention so that you can plan your future withdrawal activities accordingly.