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Delhi High Court summons RBI and ED over petition that claims PayPal is operating illegally in India

The Delhi High Court on Wednesday asked the Reserve Bank of India (RBI) and the Enforcement Directorate (ED) to respond to a petition that claims PayPal is operating in India illegally, that is, without the RBI’s authorisation, the Economic Times reported. The court issued notices to the RBI, ED and Paypal Payments Pvt Ltd, asking for their stand on the petition before the next hearing on September 18. A few websites incorrectly reported that the court had asked PayPal to halt its operations in India immediately. MediaNama reached out to PayPal but a spokesperson said that the company had no comment on the development.

The petitioner, Abhijit Mishra, alleged that PayPal was operating in India in contravention of Section 4(1) of the Payment and Settlement Systems Act, 2007, as the company did not figure in the list of authorised payment system operators that the RBI had published on May 27, 2019, the report said. Section 4(1) of the Act says that that no entity other than the RBI can commence or operate a payments system without authorisation from the central bank. Despite this, Mishra alleged, the company’s services are used by various online travel, clothing and food websites and apps.

He also alleged that PayPal was operating as a foreign exchange dealer in violation of the Foreign Exchange Management Act (FEMA) and “has unmonitored and unauthorised access to the personal information such as Aadhaar, PAN, etc of the public”. He asked the the court to order PayPal to halt its operations in India and to direct the RBI to impose fines on the company. He also sought an investigation against the company’s directors and other employees for alleged malpractice.

PayPal India reported 12x jump in revenue in 2017-18

PayPal launched its payments service in India in November 2017. Until then, it had only carried out cross-border transactions. Reports at the time said that the company had not sought a prepaid payments instrument (PPI) licence from RBI to operate a digital wallet, but could use the UPI infrastructure to facilitate domestic payments through banks. Not having a PPI licence means that customers in India cannot store any money in their PayPal accounts.

In January, PayPal India reported a 12x increase in revenue to ₹260 crore in FY18, after it began domestic payments in the fiscal. Its net profit increased marginally to ₹2 crore from ₹1.4 crore. The company was also reportedly increasing its investments across India, expanding technology and hiring, and opened a new office in Mumbai.

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