It took PayPal which is owned by eBay in San Jose, Calif., more than a week to notify customers after being flagged by Indian regulators. The Reserve Bank of India said it asked the company on Jan. 27 to immediately suspend PayPal payments to and from India as well as transfers to local banks in India. PayPal said it complied with the request the next day.

Executives from both Indian and American information technology companies say they were caught off-guard by the announcement.

“Like all the freelancing sites, we rely on PayPal,” said Alok Maheshwari, founder and chief executive of Harmony Infotech, a nine-employee Web development company in the south India state of Andhra Pradesh. “We used to get a check in our company name mailed to us instead, but we stopped because PayPal is very easy to use.”

Harmony Infotech has been relying on PayPal since 2005, and now averages about $1,500 a month in PayPal transaction payments.

On Feb. 2, Harmony Infotech got a payment via PayPal from Rent A Coder, a Tampa, Fla., company that connects computer engineers with jobs, and Mr. Maheshwari said he moved the payment to his company’s bank account in India. Two days later, the payment was reversed, leaving him with a negative PayPal balance. The payment was a “commercial” and not personal payment, he said.

PayPal says that only personal payments should have been reversed, and that if a commercial payment was reversed, the payer should resend the money. Some PayPal users send commercial payments as personal payments to avoid the fees on commercial payments.

In a notice on its Web site to the Indian companies it hires, Rent A Coder said “We have never received a coherent answer from PayPal as to why they blocked any of the payments.” To avoid the uncertainty, Rent A Coder suggested a switch to Payoneer, an alternate online payment site, which is “offering a special to Indian workers.”