Paypal now supports withdrawal of funds to your Indian Bank Account.

PayPal account, so you can withdraw your money
directly to your bank. It saves you time and gives
you faster access to your PayPal funds!

Plus, there is no charge to withdrawal amounts over INR 7000*.So, go ahead and add your bank account today!

The banks that are supported at this time include State Bank of India , Bank of India, Canara Bank, Union Bank of India, HDFC Bank, ICICI Bank, ING VYSYA Bank, UTI Bank, Standard Chartered Bank, HSBC, Citibank.

Read more on the Paypal Withdrawal to your Indian Bank Account