Paypal has suspended withdrawal of funds through NEFT due to regulatory requirements from August 1, 2010 as per the below announcements.

http://www.paypal-apac.com/India/

http://www2.ebay.com/aw/in/201007.shtml#2010-07-28112238

Paypal account holders will only be able to withdraw funds by check from July 29, 2010. At times, the postal system is unreliable, so it would be better if they offered some form of secure delivery on payment of an additional fee.

Update : On 30 July 2010,  Paypal announced that electronic withdrawals could continue.  However, some users are reporting that Mass payment has been disabled.