Normally in any economy the government and the banking system always try and offer a support system to make the economy grow, to create more business in the country, bring more dollar income, create more jobs in the country and so on. India seems to be an expert as just the opposite thanks to the illiteracy about the new economy at the top level both in banking and the finance sector. What is perhaps sadder is when the Reserve Bank of India comes with rather comical guidelines that seem to of the Imperial Times when the British wanted to finish the Indian economy to create their own in India.
The Employment Generator
The latest roadblock created by the RBI is the notification of the Reserve Bank of India governing the processing and settlement of export-related receipts facilitated by online payment gateways. Affected by this notification are at least a few million Indians who in sitting in India in small towns, in metros, in cities, in villages are earning precious foreign exchange for the country, creating jobs in small towns and actually doing a service to the country by rendering their services to US and other countries by being here and earning in dollars. Does the RBI at the top level even know what the new economy is all about before coming up with frivolous comical notifications in its attempt to curb black money.
Through sites like guru.com, elance.com, tens of online employment sites, online platforms for content writing, platforms for graphic designing and items that can be electronically delivered a new economy has actually been created. This economy though doesn't get much credit is worth more than any of the employment schemes of the government put together in the last 60 years. This economy earns in US dollars mostly thus creating precious foreign exchange in India. The biggest payment gateway for most of these is Paypal. To understand this thanks to Paypal a person with a bank account in Bathinda can actually render a service lets say he sells for $2.5. Let's say he has sold 100 units of his service and his total is now $2500. He can withdraw that amount to his bank account anywhere in India. So effectively micro payments that were impossible to receive in India till a few years ago have been made possible through these payment gateways. This has resulted in a huge digital economy.
RBI Comic Diktat
Now with effect from 1 March 2011, payment gateways like Paypal are required to comply with the requirements set out in the notification of the Reserve Bank of India. It affects these huge millions of service providers in two ways.
-- Any balance in and all future payments into your PayPal account may not be used to buy goods or services and must be transferred to your bank account in India within 7 days from the receipt of confirmation from the buyer in respect of the goods or services; and
-- Export-related payments for goods and services into your PayPal account may not exceed US$500 per transaction.
The Black Money Trail
Even an illiterate person knows that money that comes through legitimate banking channels with PAN number attached is earned white money, not even grey. The payments that comes through Paypal are traceable so does this notification help? Next what is the logic behind this payment may not exceed $500? Does the Reserve Bank of India, the Finance Secretary of the Govt of India have a problem if some entrepreneur makes $5000 in foreign exchange in India. Doesn't this RBI diktat stink of the 70's and 80's quota-nomics where Government of India decided the number of scooters and cars that can be produced by the manufacturers.
Or maybe Reserve Bank of India came up with this diktat to prevent misuse of funds by terrorists. I wish I had a creative imagination to imagine the script of a movie where a terrorist acquires a bomb by making a payment through Paypal? A definite Oscar winning plot!
Puneet Mehrotra writes on technology puneet.im email firstname.lastname@example.org