The online payment service said on Friday on its that from March 1, balances and future payments into a customer’s PayPal account may not be used to buy goods or services, and must be transferred to the customer’s bank account in India within seven days from the receipt of confirmation from the buyer in respect to goods or services.

Export-related payments for goods and services into a PayPal account may not exceed $500 per transaction, it added.

PayPal said it was complying with new requirements from India’s central bank, Reserve Bank of India (RBI), for governing the processing and settlement of export-related receipts through online payment gateways.

The Indian government is worried that intermediaries like PayPal are being used by exporters in violation of the country's foreign exchange and income tax rules.

By making it compulsory for exporters to transfer payments to accounts in Indian banks within a specified time frame, the RBI hopes to better monitor the flow of funds into India, and also ensure that tax is paid on the income, analysts said.