Few minutes back, I received a mail from PayPal stating,

“We have been diligently working with the RBI and our business partners to resume Indian bank withdrawals for the thousands of Indian businesses who depend on PayPal to sell their goods or services in the global marketplace.

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.”

This is really a good news for Indian PayPal users. Currently you can request money using check option. Indian PayPal users tried Xoom, but for some it didn’t work well.

You can check The PayPal Blog for further details.