PayPal Ending Electronic Withdrawals in India Aug. 1

PayPal announced Tuesday that starting Aug. 1, it will only allow check withdrawals for its users in India.

"At present, you can request for either an electronic or check withdrawal of funds from your PayPal account," Dickson Seow from the PayPal corporate communications team wrote in a blog post. "From July 29, 2010 onwards, you will only be able to request for a check withdrawal of funds from your PayPal account."

PayPal said it will refund the $5 check fee charged on withdrawals made on July 29 onwards.

The change stems from a government financial overhaul that has put the future of PayPal in India in jeopardy since earlier this year.

In February, PayPal halted personal payments in India amid questions from Indian regulators about whether personal payments constitute remittances--or money transfers that foreign workers make into their home countries--into India.

This suspension caught many by surprise and meant that some people with money in their PayPal accounts had no way of getting it out. PayPal had planned to start allowing withdrawals to Indian banks on February 14, but complications delayed that move until early March. Personal payments were still suspended.

To gain access to funds, users must click "Withdraw" and then "Request a check from PayPal." Check processing takes 4 to 6 working days, excluding delivery time. More details are available on PayPal's Web site.

"We sincerely apologize in advance for any inconvenience caused from this change and we are working hard to restore the electronic withdrawal service," Seow wrote "In the meantime, we are bringing this matter to your attention so that you can plan your future withdrawal activities accordingly."