It seems that the folks at PayPal have been diligentlyworking for freelancers and other online merchants in India. In an email (and a related blog post) PayPal says that they will be ready to resume local bank withdrawals by March 3rd, a few days shy of Holi:-
Today, we are happy to announce that the RBI has allowed us
to continue local bank withdrawals for settlements for exports
of goods and services. We are currently making changes to
comply with Indian regulations for settlements for exports of
goods and services, and we anticipate that, as of Wednesday,
March 3rd, customers will be able to use our
bank withdrawal service.
It seems that once the changes are in effect, any local bank withdrawal needs to have an Export Codefield filled out before the transaction is completed. This will enable the bank to identify the cross-border transaction’s nature. The necessary details will be provided in an email again on March 1st.
However, the situation on personal payments is still bleak as talks are on between PayPal and the Reserve Bank of India.
[T]he RBI has told us that PayPal needs specific
approvals to allow personal remittances to India, which we
currently do not have. Until we get these approvals, personal
payments into India will remain suspended.
Here’s to hoping that it will get solved within a few months!